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Economic policy uncertainty, prudential regulation and bank lending

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  • Hu, Shiwei
  • Gong, Di

Abstract

This paper empirically tests the theories concerning bank lending, economic policy uncertainty (EPU), and national prudential regulations. Using bank level data in 19 major economies, we find that EPU significantly hinders the growth of bank credit, but the effect varies across banks. In particular, the negative effect of EPU on loan growth is greater for larger-sized banks and riskier banks, while weaker for more liquid banks and more diversified banks. In addition, the impact of EPU on bank lending depends critically on national prudential regulations, such that the negative effect appears to be alleviated by both macroprudential and microprudential policies.

Suggested Citation

  • Hu, Shiwei & Gong, Di, 2019. "Economic policy uncertainty, prudential regulation and bank lending," Finance Research Letters, Elsevier, vol. 29(C), pages 373-378.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:373-378
    DOI: 10.1016/j.frl.2018.09.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic policy uncertainty; Prudential regulation; Macroprudential policies; Bank lending;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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