Economic policy uncertainty, bank nonperforming loans and loan loss provisions: are they correlated?

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the correlation of economic policy uncertainty (EPU) with nonperforming loans and loan loss provisions for 22 developed countries from 2008 to 2017. The findings reveal that economic policy uncertainty is negatively correlated with nonperforming loans and loan loss provisions in the banking sector of EU countries. Also, economic policy uncertainty is negatively correlated with nonperforming loans in the banking sector of the G7 countries while loan loss provision is more responsive to changes in EPU in EU countries. The implication of the findings is that the correlation of economic policy uncertainty with loan loss provisions and nonperforming loans is influenced by regional characteristics.

Keywords: Loan loss provisions; bank performance; nonperforming loans; policy uncertainty; EPU index; economic policy uncertainty; European union; correlation. (search for similar items in EconPapers)
JEL-codes: E52 E59 G21 G23 G28 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cwa, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:112381

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