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Monetary policy uncertainty and bank leverage: Evidence from China

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  • Fu, Buben
  • Luo, Daqing

Abstract

We investigate the impact of monetary policy uncertainty on bank leverage in China. First, we imply a novel method to measure China’s monetary policy uncertainty. Second, we estimate the relationship between bank leverage ratio and monetary policy uncertainty. Our main finding is that increases in monetary policy uncertainty have a significantly negative impact on bank leverage ratio in China, especially after 2008Q4. Checked with an alternative measurement of China’s monetary policy uncertainty, our finding remains robust.

Suggested Citation

  • Fu, Buben & Luo, Daqing, 2021. "Monetary policy uncertainty and bank leverage: Evidence from China," Economics Letters, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:ecolet:v:203:y:2021:i:c:s0165176521001439
    DOI: 10.1016/j.econlet.2021.109866
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    References listed on IDEAS

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    Cited by:

    1. Jingyuan Yang & Ling Wang & Ziyuan Sun & Fangming Zhu & Yihui Guo & Yan Shen, 2021. "Impact of Monetary Policy Uncertainty on R&D Investment Smoothing Behavior of Pharmaceutical Manufacturing Enterprises: Empirical Research Based on a Threshold Regression Model," IJERPH, MDPI, vol. 18(21), pages 1-17, November.
    2. Lu, Yunzhi & Li, Jie & Yang, Haisheng, 2023. "Time-varying impacts of monetary policy uncertainty on China's housing market," Economic Modelling, Elsevier, vol. 118(C).
    3. Juelsrud, Ragnar E. & Larsen, Vegard H., 2023. "Macroeconomic uncertainty and bank lending," Economics Letters, Elsevier, vol. 225(C).
    4. Baolei Qi & Mohamed Marie & Ahmed S. Abdelwahed & Ibrahim N. Khatatbeh & Mohamed Omran & Abdallah A. S. Fayad, 2023. "Bank Risk Literature (1978–2022): A Bibliometric Analysis and Research Front Mapping," Sustainability, MDPI, vol. 15(5), pages 1-27, March.
    5. Han, Haozhe & Wang, Xingjian, 2023. "Monetary policy uncertainty and corporate cash holdings: Evidence from China," Journal of Financial Stability, Elsevier, vol. 67(C).
    6. Dang, Van Dan & Nguyen, Hoang Chung, 2022. "Bank profitability under uncertainty," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 119-134.

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    More about this item

    Keywords

    Monetary policy uncertainty; Bank leverage; China;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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