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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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  15. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1996. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance: Reply," American Economic Review, American Economic Association, vol. 86(1), pages 310-14, March.
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