Bank lending in uncertain times

By Piergiorgio Alessandri, Margherita Bottero. European Economic Review, 2020

132 citations recorded by the source corpus.

We study the impact of economic uncertainty on the supply of bank credit using a monthly dataset that includes all loan applications submitted by a sample of 650,000 Italian firms between 2003 and 2012. We find that an increase in aggregate uncertainty has three effects. First, it reduces banks' likelihood to accept new credit applications. Second, it lengthens the time firms have to wait for their loans to be released. Third, it makes banks less responsive to fluctuations in short-term interest rates, weakening the bank lending channel of monetary policy. The influence of uncertainty is relatively stronger for poorly capitalized lenders and geographically distant borrowers.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/564226fc58f5437a2530b0fe2d594725d6df8a02

Citations in the corpus

• Economic uncertainty and bank risk: Evidence from emerging economies (2020, unknown): “For instance, Alessandri and Bottero (2017), using the data of Italian banks during the years of 2003-2012, suggest that uncertainty reduces banks’ likelihood to accept new credit applications, lengthens the waiting time for loans to be released and weakens banks’ responsiveness to short-term…”