The Empirical Study On The Relationship Between Economic Policy Uncertainty And Bank Lending

Using data from 2008-2016,this paper examines the impact of economic policy uncertainty on bank lending both from aggregate and commercial bank entity level.The results of statistical evidence have several important implications.First,economic policy uncertainty has a long-time significantly negative effect on bank credit.Second,entrepreneur expectation and consumer confidence are positively correlated with bank credit,which can offset the negative impact of economic policy uncertainty to some extent.Specifically,the positive effect of entrepreneur expectation can completely counteract the adverse impact of increasing economic policy uncertainty,while consumer confidence is not enough to.Third,economic policy uncertainty weakens entrepreneur expectation and consumer confidence,but as time goes on,the former will recover and surpass the original level,possibly because entrepreneurs have made new expectations of the macroeconomic situation as the policy becomes clear.Fourth,the higher the level of marketization where a bank mainly operates,and the higher the liquidity,scale,capital adequacy ratio a bank has,the less the impact of economic policy uncertainty on its bank lending.And our study finds that the effect of economic policy uncertainty on bank lending is more pronounced in regions with greater financial deepening.Based on the above conclusions,this paper puts forward some suggestions from the perspectives of economic policy making and banking regulation and supervision.Both government and central bank should pay attention to the important effect of economic policy uncertainty on public expectation,bank lending,and subsequent problems on macro-economy.They may maintain the continuity,consistency and transparency of the economic policy,thus to improve the government credibility and guide the public to make the reasonable expectations,continually deepening the marketization and keeping a reasonable pace of financial deepening.Keeping bank capital and liquidity under strict supervision by financial regulator is also essential.As for banks,they can strength the ability to resist the impact of economic uncertainty by improving credit system and censorship,as well as the capacity of macro-economy prediction.