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Economic Policy Uncertainty and the Supply of Business Loans

Santiago Barraza () and Andrea Civelli ()
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Santiago Barraza: Universidad de San Andres

No 134, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: Using a Vector Autoregressive framework of analysis, we show that banks contract their supply of business credit in response to an exogenous increase in economic policy uncertainty. This contraction takes two main, distinct forms. On the one hand, banks restrict their supply of spot funds, which we document using flows of loans and term loan originations. On the other, banks also curtail their provision of liquidity insurance, reducing the amount of new credit lines and embedding in them a pricing structure that reduces the probability of borrowers ever drawing down on the lines.

Keywords: economic policy uncertainty; bank lending; business; credit (search for similar items in EconPapers)
JEL-codes: D80 E66 G21 G28 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2019-10, Revised 2019-10
New Economics Papers: this item is included in nep-ban, nep-ias and nep-mac
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Journal Article: Economic policy uncertainty and the supply of business loans (2020) Downloads
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