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The Impact of Macroeconomic Uncertainty on Bank Lending Behavior

  • Mustafa Caglayan


    (University of Liverpool)

  • Neslihan Ozkan


    (University of Liverpool)

  • Christopher F Baum


    (Boston College)

In this paper we empirically investigate the link between bank lending and macroeconomic uncertainty using annual and quarterly U.S. bank level data. For both data sets, we show that as macroeconomic uncertainty increases, captured by an increase in the variability of industrial production or inflation, banks behave more conservatively, leading to a narrowing of the cross-sectional distribution of banks' loan--to-asset ratios. Our results are robust to the inclusion of macroeconomic factors, and provide broadly similar findings across three major categories of bank loans and total loans.

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Paper provided by University of Liverpool Management School in its series Research Papers with number 2002_02.

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Date of creation: 2002
Date of revision:
Handle: RePEc:liv:livedp:2002_02
Contact details of provider: Postal: Management School University of Liverpool, Chatham Street, Liverpool, L69 7ZH, Great Britain
Phone: +44(0)151 795 3108
Fax: +44(0)151 795 3004
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  16. Takeo Hoshi & David S. Scharfstein & Kenneth J. Singleton, 1993. "Japanese Corporate Investment and Bank of Japan Guidance of Commercial Bank Lending," NBER Chapters, in: Japanese Monetary Policy, pages 63-94 National Bureau of Economic Research, Inc.
  17. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
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