THE IMPACT OF MACROECONOMIC UNCERTAINTY ON BANK LENDING BEHAVIOR
Christopher F. BAUM(Boston College)
Mustafa CAÐLAYAN (University of Liverpool)
Neslihan ÖZKAN (University of Liverpool)
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, 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.
