Abstract
We examine the effects of uncertainty on several facets of the financial sector. Using a large country‐level unbalanced panel dataset, we show that inflation uncertainty reduces availability of private sector credit; harms banks' efficiency and operational performance, evidenced by lower returns and increased reliance on non‐interest income activities; and distorts sectoral stability, as liquidity, banks' appetite for risk and credit risk increases. Our findings, based on the full dataset and country splits, are economically meaningful and provide evidence that uncertainty threatens the overall health of the financial sector.
Original language | English |
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Journal | International Journal of Finance and Economics |
Early online date | 20 Jul 2020 |
DOIs | |
Publication status | E-pub ahead of print - 20 Jul 2020 |
Keywords
- financial depth
- non-interest income
- profitability
- stability
- uncertainty
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics