Economic policy uncertainty and bank stability: Size, capital, and liquidity matter

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dc.contributor.authorDanisman, Gamze Ozturk
dc.contributor.authorTarazi, Amine
dc.date.accessioned2024-07-18T20:56:04Z
dc.date.available2024-07-18T20:56:04Z
dc.date.issued2024
dc.departmentİstanbul Bilgi Üniversitesien_US
dc.description.abstractWe examine the impact of economic policy uncertainty on bank stability post-2007-2008 global financial crisis and how bank size, capital, and liquidity mitigate this relationship. We use 176,477 quarterly observations for US commercial banks over the period from 2011Q1 to 2020Q3 and find consistent and robust evidence that bank stability decreases as the level of economic policy uncertainty increases. We show that bank size, capital, and liquidity matter, i.e., the negative impact of policy uncertainty on bank stability is stronger for larger banks and weaker for highly capitalized banks as well as for more liquid banks. Our channel analysis shows that the increase in the level and volatility of lending and deposit rates, and the decrease in risk-adjusted capitalization and risk-adjusted profitability might to some extent explain the decrease in bank stability in times of higher economic policy uncertainty. Additional analysis reveals that higher market power mitigates the negative impact of EPU on bank stability. Our findings support the Basel II and III regulatory reforms aimed at tightening the capital levels with stricter rules for the larger banks and the implementation of the newly introduced liquidity rules.en_US
dc.identifier.doi10.1016/j.qref.2023.11.008
dc.identifier.endpage118en_US
dc.identifier.issn1062-9769
dc.identifier.issn1878-4259
dc.identifier.scopus2-s2.0-85179805314en_US
dc.identifier.scopusqualityQ2en_US
dc.identifier.startpage102en_US
dc.identifier.urihttps://doi.org/10.1016/j.qref.2023.11.008
dc.identifier.urihttps://hdl.handle.net/11411/8845
dc.identifier.volume93en_US
dc.identifier.wosWOS:001136835400001en_US
dc.identifier.wosqualityN/Aen_US
dc.indekslendigikaynakWeb of Scienceen_US
dc.indekslendigikaynakScopusen_US
dc.language.isoenen_US
dc.publisherElsevier Science Incen_US
dc.relation.ispartofQuarterly Review of Economics and Financeen_US
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/closedAccessen_US
dc.subjectEconomic Policy Uncertaintyen_US
dc.subjectBank Stabilityen_US
dc.subjectBank Risken_US
dc.subjectBank Sizeen_US
dc.subjectBank Capitalen_US
dc.subjectLiquidityen_US
dc.subjectRisk-Takingen_US
dc.subjectInterest-Ratesen_US
dc.subjectMarket Poweren_US
dc.subjectCrediten_US
dc.subjectInvestmenten_US
dc.subjectLeverageen_US
dc.subjectMergersen_US
dc.titleEconomic policy uncertainty and bank stability: Size, capital, and liquidity matteren_US
dc.typeArticleen_US

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