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Do Banks Lend Less in Uncertain Times?

Author

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  • Burkhard Raunig

    ()

  • Johann Scharler

    ()

  • Friedrich Sindermann

    ()

Abstract

We study the development of bank lending in the U.S. after four large jumps in uncertainty using an event study approach. We find that more liquid banks reduce lending less than banks with smaller liquidity ratios after a surge in uncertainty. Lending by smaller banks is also less responsive to increases in uncertainty. Banks with a higher capitalization ratio keep up lending to a greater extent, but the effect is only significant for banks which are not part of a multi-bank holding company. This heterogeneity across banks suggests that declines in bank lending following increases in uncertainty are partly the result of a reduced supply of bank loans.

Suggested Citation

  • Burkhard Raunig & Johann Scharler & Friedrich Sindermann, 2014. "Do Banks Lend Less in Uncertain Times?," Working Papers 2014-06, Faculty of Economics and Statistics, University of Innsbruck.
  • Handle: RePEc:inn:wpaper:2014-06
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    Cited by:

    1. Piergiorgio Alessandri & Margherita Bottero, 2017. "Bank lending in uncertain times," Temi di discussione (Economic working papers) 1109, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    uncertainty; bank loan supply; event study;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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