info:eu-repo/semantics/article
Uncertainty and Credit: The Chicken or the Egg Causality Dilemma
Fecha
2024Registro en:
1540-496X
Emerging Markets Finance and Trade
2-s2.0-85185520143
Autor
Su, C.W.
Lv, S.
Qin, M.
Noreña Chávez, Diego Alonso
Institución
Resumen
This paper seeks to explore whether bank credit (BC) contains useful information for mitigating economic policy uncertainty (EPU). The results of the bootstrap rolling-window test show that EPU is an effective channel for triggering BC. Additionally, it finds a feedback effect of BC on EPU, indicating that BC is a favorable tool for predicting EPU. Rising policy uncertainty leads banks to adopt aggressive or conservative credit strategies, which further increases policy adjustments. This circular relationship seems to be caught in a chicken or egg dilemma, demonstrating the importance of the government and the banking system in maintaining economic stability.