The second moments matter: The response of bank lending behavior to macroeconomic uncertainty
Year: 2004
Type: preprint
Abstract: In this paper we investigate whether macroeconomic uncertainty could distort allocation of loanable funds. To provide a road--map for our empirical investigation, we present a simple framework which demonstrates that an increase in macroeconomic uncertainty will lead to more homogeneous behavior among banks. We test this prediction on a comprehensive U.S. commercial bank data set, and find that as macroeconomic uncertainty increases the cross--sectional dispersion of banks' loan--to--asset ratios narrows, supporting our basic hypothesis. Our results are broadly similar across total loans and three major categories of bank loans, and robust to the inclusion of macroeconomic factors
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1542155685