Sentiment volatility and bank lending behavior

Research output: Contribution to journalArticle

Abstract

Using a panel of commercial, co-operative and savings banks from G7 countries, we investigate whether the changes in sentiment and its volatility affect banks' lending behavior. We show that the changes in economic agents' sentiment and its volatility affect bank lending negatively, while the impact sizes differ across indicators. We also examine volatility effects on banks' loan growth as uncertainty reaches excessive levels. We highlight the role that several bank-specific variables play on bank lending and discuss to what extent uncertainty effects are transmitted on credit growth through them.
LanguageEnglish
Pages107-120
Number of pages14
JournalInternational Review of Financial Analysis
Volume45
Early online date23 Mar 2016
DOIs
StatePublished - May 2016

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lending behavior
Volatility
G-7 country
bank
lending
savings
Uncertainty
economics
uncertainty
growth
Economics
banking
behavior
loan
cooperative
credit
panel
effect
indicator

Keywords

  • Bank loans
  • tier 1 capital
  • business sentiment
  • consumer sentiment
  • leading indicators
  • uncertainty

Cite this

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title = "Sentiment volatility and bank lending behavior",
abstract = "Using a panel of commercial, co-operative and savings banks from G7 countries, we investigate whether the changes in sentiment and its volatility affect banks' lending behavior. We show that the changes in economic agents' sentiment and its volatility affect bank lending negatively, while the impact sizes differ across indicators. We also examine volatility effects on banks' loan growth as uncertainty reaches excessive levels. We highlight the role that several bank-specific variables play on bank lending and discuss to what extent uncertainty effects are transmitted on credit growth through them.",
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Sentiment volatility and bank lending behavior. / Caglayan, Mustafa; Xu, Bing.

In: International Review of Financial Analysis, Vol. 45, 05.2016, p. 107-120.

Research output: Contribution to journalArticle

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AB - Using a panel of commercial, co-operative and savings banks from G7 countries, we investigate whether the changes in sentiment and its volatility affect banks' lending behavior. We show that the changes in economic agents' sentiment and its volatility affect bank lending negatively, while the impact sizes differ across indicators. We also examine volatility effects on banks' loan growth as uncertainty reaches excessive levels. We highlight the role that several bank-specific variables play on bank lending and discuss to what extent uncertainty effects are transmitted on credit growth through them.

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KW - tier 1 capital

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KW - consumer sentiment

KW - leading indicators

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