EconPapers    
Economics at your fingertips  
 

Economic policy uncertainty and bank stability

Gamze Danisman () and Amine Tarazi
Additional contact information
Gamze Danisman: Faculty of Economics, Administrative and Social Sciences, Kadir Has University, Turkey

Working Papers from HAL

Abstract: We examine the influence of economic policy uncertainty on bank stability post-2007-2008 global financial crisis. We rely on the economic policy uncertainty (EPU) index introduced by Baker et al. (2016). We use 176,477 quarterly observations for US commercial banks over the period from 2011Q1 to 2020Q3 and find consistent and robust evidence that bank stability decreases as the level of economic policy uncertainty increases. We specifically control for demand-side effects which indicates that the decrease in bank stability not only originates from borrowers' and customers' conditions but also from a change in bank behavior. A deeper investigation shows that the negative impact of policy uncertainty on bank stability is stronger for larger banks, and weaker for highly capitalized banks as well as for more liquid banks. Our findings have important implications particularly for the COVID-19 policy implementations.

Keywords: JEL classification: G18; G21; G28 Economic Policy Uncertainty; Bank Stability; Bank Risk; COVID-19 (search for similar items in EconPapers)
Date: 2021-06-14
New Economics Papers: this item is included in nep-ban and nep-cba
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-03259298
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-03259298/document (application/pdf)

Related works:
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:hal:wpaper:hal-03259298

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2021-09-05
Handle: RePEc:hal:wpaper:hal-03259298