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The second moments matter: The response of bank lending behaviour to macroeconomic uncertainty

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  • Christopher F Baum
  • Mustafa Caglayan
  • Neslihan Ozkan

Abstract

This paper investigates whether variations in macroeconomic uncertainty distort banks' allocation of loanable funds by affecting the predictability of banks' returns from lending. Low levels of macroeconomic uncertainty will allow bankers to base their lending decisions on more accurate evaluations of different lending opportunities, leading to a more unequal distribution of lending across banks. Contrarily, increased macroeconomic uncertainty will hinder bankers ability to identify and channel funds towards the best opportunities, including more similar lending behaviour across banks. Our empirical analysis provides support for the hypothesis that macroeconomic uncertainty adversely affects the efficient allocation of loanable banks.

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Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2005_27.

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Date of creation: Dec 2005
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Handle: RePEc:gla:glaewp:2005_27

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Citations

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Cited by:
  1. Pedro Elosegui & Paula Español & Demian Panigo & Emilio Blanco, 2007. "The Asymmetrical Impact of Restrictions to Financing in Argentina. Comparison by Sector, Size and Origin of Ownership (1995-2003)," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(48), pages 73-107, July - Se.
  2. Calmès, Christian & Théoret, Raymond, 2014. "Bank systemic risk and macroeconomic shocks: Canadian and U.S. evidence," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 388-402.
  3. Ciżkowicz, Piotr & Rzońca, Andrzej, 2012. "Does inflation harm corporate investment? Empirical evidence from OECD countries," Economics Discussion Papers 2012-63, Kiel Institute for the World Economy.
  4. Christian Merkl & Stéphanie Stolz, 2006. "Banks’ Regulatory Buffers, Liquidity Networks and Monetary Policy Transmission," Kiel Working Papers 1303, Kiel Institute for the World Economy.
  5. Mario Quagliariello, 2006. "Macroeconomics Uncertainty and Banks' Lending Decisions: The Case of Italy," Discussion Papers 06/02, Department of Economics, University of York.
  6. Christian Calmès & Raymond Théoret, 2012. "Bank systemic risk and the business cycle: Canadian and U.S. evidence," RePAd Working Paper Series UQO-DSA-wp022012, Département des sciences administratives, UQO.
  7. Calmès, Christian & Théoret, Raymond, 2010. "The impact of off-balance-sheet activities on banks returns: An application of the ARCH-M to Canadian data," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1719-1728, July.
  8. Christian Calmès & Raymond Théoret, 2008. "Banking Deregulation and Financial Stability : is it Time to re-regulate in Canada ?," RePAd Working Paper Series UQO-DSA-wp042008, Département des sciences administratives, UQO.
  9. Nguyen, James, 2012. "The relationship between net interest margin and noninterest income using a system estimation approach," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2429-2437.
  10. Piotr Ciżkowicz & Marcin Hołda & Andrzej Rzońca, 2010. "Inflation and corporate investment – a critical survey," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 41(6), pages 5-44.
  11. Christian Calmès & Raymond Théoret, 2011. "Bank systemic risk and the business cycle: An empirical investigation using Canadian data," RePAd Working Paper Series UQO-DSA-wp322011, Département des sciences administratives, UQO.
  12. Christian Calmès & Raymond Théoret, 2009. "The Impact of Banking Deregulation on Canadian Banks Returns," RePAd Working Paper Series UQO-DSA-wp022009, Département des sciences administratives, UQO.
  13. Ciżkowicz, Piotr & Rzońca, Andrzej, 2010. "Inflation and corporate investment in selected OECD countries in the years 1960-2005 – an empirical analysis," MPRA Paper 29846, University Library of Munich, Germany.

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