Sentiment volatility and bank lending behavior

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    14 Citations (Scopus)
    49 Downloads (Pure)

    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.
    Original languageEnglish
    Pages (from-to)107-120
    Number of pages14
    JournalInternational Review of Financial Analysis
    Volume45
    Early online date23 Mar 2016
    DOIs
    Publication statusPublished - May 2016

    Keywords

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

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