Bank lending in uncertain times
Piergiorgio Alessandri and
No 1703, BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics
We study the impact of economic uncertainty on the supply of bank credit using a monthly dataset that includes all loan applications submitted by a sample of 650,000 Italian firms between 2003 and 2012. We find that an increase in aggregate uncertainty has three effects. First, it reduces banks' likelihood to accept new credit applications. Second, it lengthens the time firms have to wait for their loans to be released. Third, it makes banks less responsive to fluctuations in short-term interest rates, weakening the bank lending channel of monetary policy. The influence of uncertainty is relatively stronger for poorly capitalized lenders and geographically distant borrowers.
Keywords: uncertainty; credit supply; bank lending channel; loan applications. (search for similar items in EconPapers)
JEL-codes: E51 G21 (search for similar items in EconPapers)
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Working Paper: Bank lending in uncertain times (2017)
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