Economic policy uncertainty and banks’ loan pricing

Ashraf, Badar Nadeem; Shen, Yinjie

doi:10.1016/j.jfs.2019.100695

Cited by 225 publications

(113 citation statements)

References 55 publications

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“…Third, we include an indicator for economic policy uncertainty in the estimations since uncertainty in government policies exerts an influence on borrower average risk. In line with that, Ashraf and Shen (2019) have shown that greater economic policy uncertainty increases banks' loan pricing.…”

Section: Robustness Checkssupporting

confidence: 64%

“…Second, we improve our understanding of the determinants of loan characteristics. This vast literature has shown the influence of legal (Qian and Strahan, 2007;Bae and Goyal, 2009;Waisman, 2013;Hasan et al, 2014) and economic determinants, for example, monetary policy (Delis, Hasan and Mylonidis, 2017) and economic policy uncertainty (Ashraf and Shen, 2019). We extend this literature in the direction of culture and, more precisely, of language.…”

Section: Introductionmentioning

confidence: 90%

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Are loans cheaper when tomorrow seems further?

Godlewski

Weill

2021

Economic Modelling

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This paper studies how future tense marking affects the terms of bank loans. We predict that languages that grammatically mark the future affect speakers' intertemporal preferences and thereby reduce the perception of the risks associated with loan issuance. We test this hypothesis on a sample of 977 bank loans from 17 European countries. We observe that the use of a language with future tense marking is associated with lower loan spreads and lower collateral use in loan contracts. The results corroborate Chen (American Economic Review, 2013)'s hypothesis that future tense marking makes the future more distant than the present. They suggest that linguistic structure affects terms of loan contracts. JEL Codes: D83, G20, G41, Z13.

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Section: Robustness Checkssupporting

confidence: 64%

Section: Introductionmentioning

confidence: 90%

Are loans cheaper when tomorrow seems further?

Godlewski

Weill

2021

Economic Modelling

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“…Previous studies have shown the important implications of uncertainty for the financial sector and the economy as a whole, following the seminal work of Knight (1921) which pioneered the scholarly endeavours to understand the causes and the consequences of uncertainty. It is now common that high levels of economic uncertainty can have significant impacts on, among others, the probability of recessions, bank loans’ pricing, cost of capital, corporate cash policy, corporate innovation, and currency exchange activities (e.g., Karnizova and Li, 2014 , Berg and Mark, 2018 , Ashraf and Shen, 2019 , Li and Zhong, 2020 , Xu, 2020 ). Economic agents and policymakers thus face a number of various economic challenges as economic uncertainty makes it difficult to forecast the future economic and financial outlook as well as to carry out effective forward-looking macroeconomics policies ( Nasir & Morgan, 2018 ).…”

Section: Introductionmentioning

confidence: 99%

Spillovers and connectedness in foreign exchange markets: The role of trade policy uncertainty

Huynh

Nasir

Nguyen

2023

The Quarterly Review of Economics and Finance

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Highlights Directional spillover effects and connectedness for both return and volatility. Nine US dollar exchange rates of globally most traded currencies. Asymmetric spillovers and connectedness among these currencies with trade policy uncertainty. The stronger volatility spillover than the return connectedness. The role for predicting currency market dynamics with the trade policy uncertainty patterns.

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“…Since its introduction, there is a rising interest in the literature to examine the impact of EPU on several financial and economic outcomes including stock returns, Bitcoin prices, real estate industry, growth, and oil prices. In the banking literature, several studies have examined the impact of EPU on non-performing loans (Karadima and Louri, 2020), credit growth (Bordo et al, 2016;Nguyen et al, 2020), credit risk (Chi and Li, 2017), bank valuations (He and Niu, 2018), banks' loan pricing (Ashraf and Shen, 2019), loan loss provisions (Ng et al, 2020), and bank stability (Phan et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Economic Uncertainty and Bank Stability: Conventional vs. Islamic Banking

et al. 2020

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In this paper, we explore whether economic uncertainty differently affects the default risk of Islamic and conventional banks. Using a sample of 568 banks from 20 countries between 2009 and 2018, we take advantage of the World Uncertainty Index (WUI) proposed by Ahir et al. (2018) to conduct a study based on a comparable measure across countries. Our findings indicate that, while economic uncertainty increases the default risk of conventional banks, Islamic banks' default risk is not affected. To shed light on why economic uncertainty differently influences the default risk of Islamic and conventional banks, we explore the influence of religiosity, institutional factors and bank-level heterogeneity. We observe that Islamic banks' default risk is immune to uncertainty in all types of countries but that such a difference with conventional banks mainly holds for banks with higher non-interest income and larger size, and for banks which are publicly traded. Moreover, our findings show that conventional banks suffer more from uncertainty in terms of stability in countries with higher religiosity. Our results are robust to alternative estimation techniques to deal with endogeneity and to alternative variable measurements.

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Economic policy uncertainty and banks’ loan pricing

Cited by 225 publications

References 55 publications

Are loans cheaper when tomorrow seems further?

Are loans cheaper when tomorrow seems further?

Spillovers and connectedness in foreign exchange markets: The role of trade policy uncertainty

Economic Uncertainty and Bank Stability: Conventional vs. Islamic Banking

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