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Uncertainty, Bank Lending, and Bank-Level Heterogeneity

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  • Claudia M Buch
  • Manuel Buchholz
  • Lena Tonzer

Abstract

We analyze how uncertainty affects bank lending. We measure uncertainty as the cross-sectional dispersion of shocks to bank-level variables. Comparing this measure of uncertainty in banking to more traditional measures of uncertainty, we find similar but no identical patterns. Higher uncertainty in banking has negative effects on bank lending. This effect is heterogeneous across banks: lending by banks that are better capitalized and have higher liquidity buffers tends to be affected less. Also, the degree of internationalization matters, as loan supply by banks in financially open countries is affected less by uncertainty. The impact of the ownership status of the individual bank is less important, in contrast.

Suggested Citation

  • Claudia M Buch & Manuel Buchholz & Lena Tonzer, 2015. "Uncertainty, Bank Lending, and Bank-Level Heterogeneity," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(4), pages 919-954, November.
  • Handle: RePEc:pal:imfecr:v:63:y:2015:i:4:p:919-954
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    Citations

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    Cited by:

    1. Buchholz, Manuel & Tonzer, Lena & Berner, Julian, 2016. "Asymmetric Investment Responses to Firm-specific Uncertainty," IWH Discussion Papers 7/2016, Halle Institute for Economic Research (IWH).
    2. Grimme, Christian, 2017. "Uncertainty and the Cost of Bank vs. Bond Finance," MPRA Paper 79852, University Library of Munich, Germany.
    3. repec:ijc:ijcjou:y:2019:q:4:a:3 is not listed on IDEAS
    4. Ambrocio, Gene, 2017. "The real effects of overconfidence and fundamental uncertainty shocks," Research Discussion Papers 37/2017, Bank of Finland.
    5. Nils Jannsen & Galina Potjagailo & Maik H. Wolters, 2019. "Monetary Policy during Financial Crises: Is the Transmission Mechanism Impaired?," International Journal of Central Banking, International Journal of Central Banking, vol. 15(4), pages 81-126, October.
    6. Altavilla, Carlo & Carboni, Giacomo & Lenza, Michele & Uhlig, Harald, 2019. "Interbank rate uncertainty and bank lending," Working Paper Series 2311, European Central Bank.
    7. Tonzer, Lena, 2017. "Uncertainty, financial crises, and subjective well-being," IWH Discussion Papers 2/2017, Halle Institute for Economic Research (IWH).
    8. Eichler, Stefan & Littke, Helge C.N. & Tonzer, Lena, 2017. "Central bank transparency and cross-border banking," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 1-30.
    9. repec:bis:biscgf:60 is not listed on IDEAS
    10. Santiago Barraza & Andrea Civelli, 2019. "Economic Policy Uncertainty and the Supply of Business Loans," Working Papers 134, Universidad de San Andres, Departamento de Economia, revised Oct 2019.
    11. Manuel Buchholz & Lena Tonzer & J. Berner, 2016. "Asymmetric Investment Responses to Firm-specific Uncertainty," IWH Discussion Papers 7, Halle Institute for Economic Research.
    12. Daniel Dejuán & Corinna Ghirelli, 2018. "Policy uncertainty and investment in Spain," Working Papers 1848, Banco de España;Working Papers Homepage.
    13. Buchholz, Manuel & Schmidt, Kirsten & Tonzer, Lena, 2017. "Do conventional monetary policy instruments matter in unconventional times?," IWH Discussion Papers 12/2017, Halle Institute for Economic Research (IWH).
    14. repec:zbw:iwhdps:7-16 is not listed on IDEAS
    15. Michael Pedersen, 2016. "Pass-Through, Expectations, and Risks. What Affects Chilean Banks’ Interest Rates?," Working Papers Central Bank of Chile 780, Central Bank of Chile.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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