The second moments matter: The response of bank lending behavior to macroeconomic uncertainty.

Mustafa Caglayan, F C Baum, N Ozkan

    Research output: Contribution to journalArticle

    29 Citations (Scopus)

    Abstract

    In this paper we investigate whether macroeconomic uncertainty could distort banks’ allocation of loanable funds. To provide a road– map for our empirical investigation, we present a simple framework which demonstrates that lower uncertainty about the return from lending should lead to a more unequal distribution of lending across banks as managers take advantage of more precise knowledge of different lending opportunities. When bank–specific differences in lending opportunities are harder to predict, we should observe less cross– sectional variation in loan–to–asset ratios. Using a comprehensive U.S. commercial bank data set, we receive support for our hypothesis.
    Original languageEnglish
    Pages (from-to)87–89
    JournalEconomics Letters
    Volume102
    Issue number2
    DOIs
    Publication statusPublished - 2009

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