Macroeconomic uncertainty and banks' lending decisions: the case of Italy

Mario Quagliariello

Applied Economics, 2009, vol. 41, issue 3, 323-336

Abstract: This article discusses the role that macroeconomic uncertainty plays in banks' decisions on the optimal asset allocation. Following the portfolio model proposed by Baum et al. (2005), the article aims at disentangling how Italian banks choose between loans and risk-free assets when uncertainty on macroeconomic conditions increases. The econometric results confirm that macroeconomic uncertainty is a significant determinant of banks' investment decisions, also after controlling for other factors. In periods of increasing turmoil, banks' ability to accurately forecast future returns is hindered and herding behaviour tends to emerge, as witnessed by the reduction of the cross-sectional variance of the share of loans held in portfolio.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00036840601007286 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Macroeconomic uncertainty and banks' lending decisions: The case of Italy (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:41:y:2009:i:3:p:323-336

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036840601007286

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().