•  
  •  
 
Bulletin of Monetary Economics and Banking

Document Type

Article

Abstract

This paper examines the relationship between trade uncertainty and bank lending using a sample of commercial banks in China and the European Union (EU) countries. Using a sample of commercial banks in China and the European Union (EU) countries during the period of heightened trade uncertainty from 2017Q1 to 2021Q3 measured by Ahir et al.’s (2018) World Trade Uncertainty (WTU) index, we show that trade uncertainty slows bank credit growth. We find no significant difference in the lending response to trade uncertainty between Chinese and EU banks. Our additional analyses indicate that the credit-reducing effect of trade uncertainty is stronger for better-capitalised banks and more liquid banks. We also find that trade uncertainty is negatively associated with the growth of different bank funding sources, namely, customer deposits, liabilities, and equity. However, we do not find significant evidence that trade uncertainty affects bank credit risk.

First Page

299

Last Page

326

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Qatar

Affiliation

Hamad Bin Khalifa University

Check for updates

Included in

Finance Commons

Share

COinS