Economic policy uncertainty, prudential regulation and bank lending

Shiwei Hu and Di Gong

Finance Research Letters, 2019, vol. 29, issue C, 373-378

Abstract: This paper empirically tests the theories concerning bank lending, economic policy uncertainty (EPU), and national prudential regulations. Using bank level data in 19 major economies, we find that EPU significantly hinders the growth of bank credit, but the effect varies across banks. In particular, the negative effect of EPU on loan growth is greater for larger-sized banks and riskier banks, while weaker for more liquid banks and more diversified banks. In addition, the impact of EPU on bank lending depends critically on national prudential regulations, such that the negative effect appears to be alleviated by both macroprudential and microprudential policies.

Keywords: Economic policy uncertainty; Prudential regulation; Macroprudential policies; Bank lending (search for similar items in EconPapers)
JEL-codes: G18 G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (75)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:29:y:2019:i:c:p:373-378

DOI: 10.1016/j.frl.2018.09.004

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