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The effect of Economic Policy Uncertainty on the credit risk of US commercial banks

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  • Carmen Orden‐Cruz
  • Jessica Paule‐Vianez
  • Júlio Lobão

Abstract

This article analyses the impact of Economic Policy Uncertainty (EPU) on the credit risk of US commercial banks considering their size, profitability and solvency. To achieve this goal, a sample of 2994 US commercial banks was selected for the period 2017–2019. Using panel data, the results reveal a statistically significant positive relationship between EPU and credit risk of US commercial banks. Banks of less profitability and less solvency were found to be more vulnerable to the effect of EPU on credit risk. No conclusive results were found regarding the impact of bank size on vulnerability to EPU. Overall, our evidence suggests that policy makers and bank managers should consider the effect of EPU on their decisions.

Suggested Citation

  • Carmen Orden‐Cruz & Jessica Paule‐Vianez & Júlio Lobão, 2023. "The effect of Economic Policy Uncertainty on the credit risk of US commercial banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3420-3436, July.
    • Handle: RePEc:wly:ijfiec:v:28:y:2023:i:3:p:3420-3436
    DOI: 10.1002/ijfe.2600
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