Sentiment volatility and bank lending behavior

Mustafa Caglayan () and Bing Xu ()

International Review of Financial Analysis, 2016, vol. 45, issue C, 107-120

Abstract: Using a panel of commercial, co-operative and savings banks from G7 countries, we investigate whether the changes in sentiment and its volatility affect banks' lending behavior. We show that the changes in economic agents' sentiment and its volatility affect bank lending negatively, while the impact sizes differ across indicators. We also examine volatility effects on banks' loan growth as uncertainty reaches excessive levels. We highlight the role that several bank-specific variables play on bank lending and discuss to what extent uncertainty effects are transmitted on credit growth through them.

Keywords: Bank loans; Tier 1 capital; Business sentiment; Consumer sentiment; Leading indicators; Uncertainty (search for similar items in EconPapers)
JEL-codes: C22 C23 D81 E51 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (19)

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Working Paper: Sentiment Volatility and Bank Lending Behavior (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:45:y:2016:i:c:p:107-120

DOI: 10.1016/j.irfa.2016.03.009

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