This paper examines the role of economic uncertainty in the Eurozone countries by analyzing the credit supply and the evolution of non-performing loans following the 2008 global financial crisis. The discussion centers on how greater economic uncertainty restricts credit supply and increases the number of non-performing loans. Quarterly data for the Eurozone countries are studied for the period 2005 to 2016. To test the aforementioned hypothesis, an index of economic uncertainty for the Eurozone countries is calculated. Panel data analysis is performed using fixed effects estimation. This approach allows for individual heterogeneity, with different intercepts across countries and quarterly time dummies to control for time-specific effects that are common to all countries in the sample. The primary conclusions of the analysis are as follows: (1) When economic uncertainty increases, total gross loans decrease, and the number of non-performing loans increases. (2) When uncertainty increases, loans to deposit-takers, other domestic sectors, and general government decrease, while loans to financial corporations increase as a means of supporting the financial sector. (3) The most vulnerable Eurozone economies play a prominent role in these overall effects. In these economies, the effects of the recent global financial crisis are most pronounced, with uncertainty increasing significantly over the study period.
The effects of uncertainty on economic activity vary, but their primary consequence is to shape behaviors and actions that deviate from the framework of rationalization and maximization of wealth and prosperity. Uncertainty also affects the development of modern production models. A sharp increase in uncertainty due to political or economic shocks may have a direct, strong, and enduring impact on the economy (
These consequences have led to considerable debate regarding banks’ lending behavior during economic crises (
The decline in bank lending during crises can be attributed to one of two reasons. The first is the reduction in credit supply, perhaps due to greater uncertainty, information asymmetry, and moral hazard. The second reason relates to changes in demand for credit. During recessions and crises, economic conditions are unfavorable, so profitable investments are scarce, and the risk of unemployment for consumers is high (
This paper assesses how greater economic uncertainty reduces credit supply and increases the number of NPLs. It is examined whether uncertainty was a critical factor for the Eurozone economies after the recent global financial crisis. In particular, it is studied how uncertainty—which is inherent in economic policymaking and decision making—drives credit supply in the Eurozone economies and how uncertainty affects NPLs. The goal is to build a new measure of economic uncertainty for all Eurozone countries.
This paper enriches the literature by contributing to the debate on the degree to which uncertainty affects economic performance in the Eurozone countries. To the best of our knowledge, this is the first objective economic uncertainty index for all Eurozone economies. This economic uncertainty index offers a more complete measure than variables that express uncertainty, because these variables are indications rather than measures of uncertainty. This is also the first time that a measure of economic uncertainty has been linked to credit supply and the evolution of NPLs for the Eurozone countries in the midst of the crisis. In this paper, the effects of uncertainty on credit supply are separated according to the category of credit supply. The impact of uncertainty on each category is examined. The economic uncertainty index offers a useful, reliable tool to address the role of uncertainty in economic activity and provide guidance to help policymakers design better economic policies and address uncertainty.
The structure of this article is as follows:
Following a financial crisis, numerous factors lead to greater uncertainty and risk in the economy (
The effects of uncertainty on economic outcomes are particularly acute and may have direct, dynamic, and enduring economic consequences (
The impact of uncertainty may also be due to other factors, such as a rise in funding costs (
No empirical study has examined the relationships between high uncertainty and changes in credit supply and the number of NPLs. Most studies have linked credit supply to business cycles (
Other studies have linked credit supply to financial crises. Economic crises are usually accompanied by reductions in bank lending (
During the period before the recent global financial crisis, there was a significant increase in credit supply (
However, this increase in credit supply during periods of economic growth usually leads to problems in the financial sector because credit is supplied without due care. Therefore, credit supply to individuals and legal entities with weak creditworthiness tends to increase (
When the financial system becomes threatened by credit risk, which is due to the credit expansion that leads to financial crisis and recession, the economy reacts by adopting tighter credit standards and imposing stricter credit controls (
An increase in the number of NPLs is a direct, inevitable consequence of financial crises (
Numerous studies have linked the emergence of NPLs to economic growth (
Besides GDP growth, other macroeconomic factors also seem to increase the number of NPLs. Such factors include unemployment (
Factors that relate to the banking system itself are also responsible for the evolution of NPLs. One such factor is capital adequacy, as measured by the equity-to-assets ratio (
The emergence of NPLs also affects macroeconomic performance. Studies have shown that a high number of NPLs reduces credit as a percentage of GDP, slows down economic growth, increases unemployment (
To explore the relationships between uncertainty and credit supply and between uncertainty and the number of NPLs, we used an unbalanced panel of quarterly data for 19 Eurozone countries (see
The analysis was based on fixed effects estimation, which allows for individual heterogeneity. Thus, different intercepts were used across countries, and estimation was performed using ordinary least squares. As mentioned earlier, we included quarterly time dummies to account for time-specific effects that were common to all countries in the sample. We employed a cluster-robust approach for standard errors to control for within-cluster correlation and heteroskedasticity.
To construct the economic uncertainty index, daily data for national stock market high capitalization indexes were used for the countries in this study. Following
An overall uncertainty indicator was created for each country by computing a rolling-window 30-day standard deviation of the main stock index returns. To isolate country-specific shocks, the monthly average of this uncertainty index (
The dataset for credit supply and NPLs was based on the IMF Financial Soundness Indicators (FSIs).
To examine the specific effects of economic uncertainty on loan supply and NPLs by country, the following estimation equation was employed. This equation is the same as Equation (1), but not in panel form. Equation (2) was estimated separately for each country using simple ordinary least squares:
The quarterly pattern of uncertainty shows the evolution of economic uncertainty since 2005. There were sharp, country-specific uncertainty shocks around the dates of major political and economic turbulence. Since the onset of the crisis, most Eurozone economies have been hit by a series of uncertainty shocks.
The next phase of our analysis was to examine the effects of uncertainty on credit supply and the number of NPLs.
Next, to illustrate the effect of uncertainty on credit supply and the evolution of NPLs by country,
The correlation matrix provides several significant indications of the effect of uncertainty on credit supply and the evolution of NPLs by country. For most countries, there were strong negative or positive correlations with uncertainty. This result holds for all variables, with the exception of loans to the central bank (significant negative correlation for Greece) and loans to general government (negative correlation for Estonia and positive correlation for Ireland and Spain). Separate estimates of Equation (2) illustrate how uncertainty affected each country (
Estimation of Equation (2) for Austria (
For Belgium (
For
For
For Finland (
As in the case of Austria, for France (
Estimation of Equation (2) for Germany (
For Greece (
Estimation of Equation (2) for Ireland (
For Italy (
Estimation of Equation (2) for the economy of
For Lithuania, there was a significant negative relationship between uncertainty and total gross loans, loans to residents, loans to financial and non-financial corporations, and loans to other domestic sectors. Data for Lithuania spanned the period from Q4 2008 to Q3 2016 (
For Luxembourg (
Malta is another country whose economy was not significantly affected by the recent global financial crisis. Estimation of Equation (2) for Malta (
For the Netherlands (
Estimation of Equation (2) for Portugal (
As with Portugal, for Slovakia (
Slovenia is another country whose economy was not significantly affected by the recent global financial crisis. Estimation of Equation (2) for the Slovenian economy (
Finally, estimation of Equation (2) for Spain revealed a significant negative relationship between uncertainty and loans to other domestic sectors and a significant positive relationship between uncertainty and loans to general government, loans to other domestic sectors, and the two NPL variables. Data for Spain spanned the period from Q4 2005 to Q4 2016 (
Using quarterly data that spanned the period from Q1 2005 to Q4 2016 for the Eurozone economies, the empirical analysis shows strong links between uncertainty and credit supply and between uncertainty and the evolution of NPLs. In particular, when uncertainty in the economy increases, total gross loans (to residents and non-residents) decrease. Conversely, the number of NPLs increases. The opposite relationships occurs when uncertainty decreases. Regarding loans to residents, loans to deposit-takers decrease with increasing uncertainty, as do loans to other domestic sectors and loans to the general government. In contrast, loans to financial corporations share a positive relationship with an increase in uncertainty, highlighting efforts to support the financial sector during periods of high uncertainty.
Regarding the effect of uncertainty on country-by-country credit supply, the analysis shows that countries that experienced the most pronounced effects of the crisis (i.e., Estonia, Finland, Greece, Italy, Portugal, and Spain), along with Belgium, Lithuania, Luxembourg, and the Netherlands, reduced credit supply when uncertainty rose and increased credit supply when uncertainty fell. Other countries (i.e., Cyprus, Ireland, Latvia, Malta, and Slovenia) increased credit supply when uncertainty rose and reduced credit supply when uncertainty fell. This finding implies that these countries use lending as a tool to tackle uncertainty. When uncertainty declines, they cease to use this tool. Finally, for the economies of Austria, Germany, France, and Slovakia, the level of uncertainty either remained stable or declined during the recent crisis. Thus, for these countries, there was no significant relationship with credit supply.
Country-by-country examination of the effect of uncertainty on the evolution of NPLs showed that in Belgium, Cyprus, Greece, Ireland, Italy, Lithuania, Malta, the Netherlands, and Spain, a rise in uncertainty was accompanied by a rise in the number of NPLs. Likewise, a decline in uncertainty was accompanied by a decline in the number of NPLs. In Estonia and Luxembourg, when uncertainty increased, the number of NPLs decreased, and when uncertainty decreased, the number of NPLs increased. Finally, in Austria, Finland, France, Germany, Latvia, Slovakia, and Slovenia, uncertainty generally declined during the recent crisis and had no effect on the evolution of NPLs.
The empirical results lead to several important conclusions. These conclusions are relevant not only to policymakers and governments of the Eurozone economies, but also to any organization or individual with an interest in the effects of uncertainty on economies and economic outcomes. For governments to reduce uncertainty in their economies, they need to scrutinize the directions they follow in the future. Policymakers should avoid hasty decisions during crises. Instead, they should focus on building the resilience of households, communities, businesses, the financial system, and the economy as a whole. They must build appropriate economic institutions that can reduce uncertainty and increase confidence. In addition, macroeconomic government policy plays a unique, key role in managing risk and uncertainty at the national level. Macroeconomic policies contribute to the management of external sector or systemic domestic factors. A stable external environment and a strong macroeconomic policy framework not only explain low uncertainty in an economy, but also reduce the likelihood of a recession. Finally, if businesses and households do not invest, governments may need to stimulate the economy by investing themselves.
The first limitation of this study refers to the availability of credit supply data. Poor data availability for certain countries in certain years meant that the study period varied for different economies. The IMF’s financial soundness indicators provided insufficient data for all Eurozone countries. Data for some countries were available only for some quarters, while for other countries, data were available for the whole study period.
Future research could use the uncertainty index that is presented in this paper as an indicator of economic uncertainty in relation to other macroeconomic variables. Furthermore, it would be of interest to examine the relationship between uncertainty in different economies and type of credit supply such as mortgage lending, consumer credit, and so forth.
List of countries and abbreviations.
Country | Abbreviation |
---|---|
Austria | AT |
Belgium | BE |
Cyprus | CY |
Estonia | EE |
Finland | FI |
France | FR |
Germany | DE |
Greece | GR |
Ireland | IE |
Italy | IT |
Latvia | LV |
Lithuania | LT |
Luxembourg | LU |
Malta | MT |
Netherlands | NL |
Portugal | PT |
Slovak Republic | SK |
Slovenia | SI |
Spain | ES |
Stock indexes by country.
AS51 Index | |
BEL20 Index | |
CYSMFTSE Index | |
TALSE Index | |
HEX25 Index | |
CAC Index | |
DAX Index | |
FTASE Index | |
ISEQ Index | |
FTSEMIB Index | |
RIGSE Index | |
VILSE Index | |
LUXXX Index | |
MALTEX Index | |
AEX Index | |
PSI20 Index | |
SBITOP Index | |
SKSM Index | |
IBEX Index | |
SPX Index | |
SPTSX60 Index | |
MEXBOL Index | |
IBOV Index | |
SX5E Index | |
UKX Index | |
NKY Index | |
HSI Index | |
BSE SENSEX Index |
Availability of data by country.
Uncertainty Index | Total Gross Loans | Loans to Residents | Loans to Deposit-Takers | Loans to Financial Corporations | Loans to Non-Financial Corporations | Loans to Other Domestic Sectors | Loans to Central Bank | Loans to General Government | Loans to Non-Residents | NPL to Total Gross Loans | NPL Net of Provisions to Capital | |
---|---|---|---|---|---|---|---|---|---|---|---|---|
Austria | 2005q1–2016q4 | 2010q1–2016q4 | ||||||||||
Belgium | 2006q4–2016q3 | |||||||||||
Cyprus | 2008q4–2016q1 | |||||||||||
Estonia | 2008q4–2016q4 | |||||||||||
Finland | 2005q1–2016q3 | 2005–2012 yearly data | 2005q1–2016q3 | |||||||||
France | 2010q2–2013q4 | 2010q2–2012q2 | - | - | 2010q2–2012q2 | - | 2010q2–2016q4 | |||||
Germany | 2008q4–2016q4 | 2005–2015 yearly data | - | |||||||||
Greece | 2008q3–2016q4 | |||||||||||
Ireland | 2010q1–2016q3 | |||||||||||
Italy | 2005q4–2007q2, 2008q2–2016q2 | 2005q4–2016q2 | ||||||||||
Latvia | 2011q1–2016q4 | |||||||||||
Lithuania | 2008q4–2016q3 | 2008q4–2014q2, 2015q2–2016q3 | 2008q4–2016q3 | 2008q4–2012q3, 2015q2–2016q3 | 2008q4–2016q3 | - | 2008q4–2016q3 | |||||
Luxembourg | 2009q1 2016q4 | 2009q1–2013q4 | ||||||||||
Malta | 2005q1–2016q4 | |||||||||||
Netherlands | 2008q1–2016q4 | |||||||||||
Portugal | 2005q4, 2006q4, 2007q4, 2008q4–2016q3 | 2007q4, 2008q4, 2009q4–2016q3 | ||||||||||
Slovenia | 2010q4–2016q4 | |||||||||||
Slovakia | 2011q1–2016q4 | |||||||||||
Spain | 2005q4–2016q4 | - | - | 2005q4–2016q4 |
The effects of uncertainty on loan supply and NPLs in Austria.
Dependent var. | Uncertainty | |||
---|---|---|---|---|
Total gross loans | 33.83 |
28 | 0.028 | 0.77 |
Loans to residents | 22.49 |
28 | 0.045 | 1.25 |
Loans to deposit-takers | 26.97 |
28 | 0.051 | 1.39 |
Loans to financial corporations | 0.69 |
28 | 0.009 | 0.25 |
Loans to non-financial corporations | 1.26 |
28 | 0.573 | 0.32 |
Loans to other domestic sectors | −5.90 |
28 | 0.058 | 1.62 |
Loans to central bank | 0.03 |
28 | 0.000 | 0.00 |
Loans to general government | −0.57 |
28 | 0.016 | 0.44 |
Loans to non-residents | 11.34 |
28 | 0.011 | 0.29 |
NPL to total gross loans | −0.01 |
28 | 0.014 | 0.37 |
NPL net of provisions to capital | −0.01 |
28 | 0.047 | 1.28 |
The effects of uncertainty on loan supply and NPLs in Belgium.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −163.66 *** |
40 | 0.216 | 10.50 *** |
Loans to residents | −31.42 |
40 | 0.057 | 2.31 |
Loans to deposit-takers | −71.17 *** |
40 | 0.368 | 22.14 *** |
Loans to financial corporations | 9.38 ** |
40 | 0.105 | 4.48 ** |
Loans to non-financial corporations | −4.49 |
40 | 0.016 | 0.62 |
Loans to other domestic sectors | 39.33 *** |
40 | 0.288 | 15.38 *** |
Loans to central bank | −0.62 |
40 | 0.008 | 0.32 |
Loans to general government | −3.85 |
40 | 0.009 | 0.35 |
Loans to non-residents | −132.24 ** |
40 | 0.092 | 3.88 ** |
NPL to total gross loans | 0.01 *** |
40 | 0.263 | 13.59 *** |
NPL net of provisions to capital | 0.01 *** |
40 | 0.184 | 8.61 *** |
The effects of uncertainty on loan supply and NPLs in Cyprus.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −16.47 |
30 | 0.063 | 1.89 |
Loans to residents | 13.60 *** |
30 | 0.365 | 16.16 *** |
Loans to deposit-takers | −0.25 |
30 | 0.011 | 0.32 |
Loans to financial corporations | 1.55 *** |
30 | 0.401 | 18.70 *** |
Loans to non-financial corporations | 1.62 * |
30 | 0.089 | 2.74 * |
Loans to other domestic sectors | 9.88 *** |
30 | 0.479 | 25.83 *** |
Loans to central bank | 0.72 |
30 | 0.042 | 1.24 |
Loans to general government | 0.07 |
30 | 0.012 | 0.36 |
Loans to non-residents | −30.08 *** |
30 | 0.214 | 7.64 *** |
NPL to total gross loans | 0.02 *** |
30 | 0.199 | 6.97 *** |
NPL net of provisions to capital | 0.17 *** |
30 | 0.217 | 7.77 *** |
The effects of uncertainty on loan supply and NPLs in Estonia.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −212.52 *** |
33 | 0.256 | 10.70 *** |
Loans to residents | −193.99 *** |
33 | 0.248 | 10.26 *** |
Loans to deposit-takers | −0.03 |
33 | 0.014 | 0.44 |
Loans to financial corporations | −7.49 *** |
33 | 0.324 | 14.91 *** |
Loans to non-financial corporations | −88.23 *** |
33 | 0.249 | 10.32 *** |
Loans to other domestic sectors | −93.45 *** |
33 | 0.243 | 9.99 *** |
Loans to central bank | 0.00 |
33 | 0.037 | 1.21 |
Loans to general government | −4.78 *** |
33 | 0.207 | 8.13 *** |
Loans to non-residents | −18.52 *** |
33 | 0.343 | 16.19 *** |
NPL to total gross loans | −0.01 |
33 | 0.071 | 2.34 |
NPL net of provisions to capital | −0.017 *** |
33 | 0.178 | 6.72 *** |
The effects of uncertainty on loan supply and NPLs in Finland.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | 44.29 |
47 | 0.045 | 2.12 |
Loans to residents | 22.38 |
47 | 0.029 | 1.35 |
Loans to deposit-takers | −1.84 * |
47 | 0.059 | 2.86 * |
Loans to financial corporations | 6.03 ** |
47 | 0.080 | 3.91 ** |
Loans to non-financial corporations | 1.61 |
47 | 0.009 | 0.44 |
Loans to other domestic sectors | 14.44 |
47 | 0.037 | 1.73 |
Loans to central bank | 2.14 |
47 | 0.006 | 0.30 |
Loans to general government | 0.01 |
47 | 0.000 | 0.00 |
Loans to non-residents | 21.90 * |
47 | 0.063 | 3.04 * |
NPL to total gross loans | 0.01 |
8 | 0.281 | 2.36 |
NPL net of provisions to capital | 0.01 |
44 | 0.007 | 0.29 |
The effects of uncertainty on loan supply and NPLs in France.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −8.82 |
15 | 0.002 | 0.02 |
Loans to residents | −226.83 |
9 | 0.219 | 1.97 |
Loans to deposit-takers | −16.46 |
9 | 0.023 | 0.17 |
Loans to financial corporations | −11.52 |
9 | 0.043 | 0.32 |
Loans to non-financial corporations | −50.77 |
9 | 0.013 | 0.10 |
Loans to other domestic sectors | - | - | - | - |
Loans to central bank | - | - | - | - |
Loans to general government | −24.25 |
9 | 0.026 | 0.19 |
Loans to non-residents | - | - | - | - |
NPL to total gross loans | 0.01 |
27 | 0.005 | 0.14 |
NPL net of provisions to capital | −0.01 |
27 | 0.009 | 0.24 |
The effects of uncertainty on loan supply and NPLs in Germany.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −347.28 |
33 | 0.042 | 1.37 |
Loans to residents | −197.53 |
33 | 0.018 | 0.58 |
Loans to deposit-takers | −63.50 |
33 | 0.033 | 1.07 |
Loans to financial corporations | 29.76 |
33 | 0.050 | 1.64 |
Loans to non-financial corporations | −54.12 |
33 | 0.043 | 1.39 |
Loans to other domestic sectors | −126.60 |
33 | 0.048 | 1.58 |
Loans to central bank | 7.44 |
33 | 0.001 | 0.01 |
Loans to general government | 9.47 |
33 | 0.005 | 0.15 |
Loans to non-residents | −167.41 *** |
33 | 0.283 | 12.26 *** |
NPL to total gross loans | 0.01 |
11 | 0.178 | 1.95 |
NPL net of provisions to capital | - | - | - | - |
The effects of uncertainty on loan supply and NPLs in Greece.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −47.05 * |
34 | 0.103 | 3.69 * |
Loans to residents | 1.48 |
34 | 0.000 | 0.01 |
Loans to deposit-takers | −8.33 *** |
34 | 0.463 | 27.66 *** |
Loans to financial corporations | 3.04 *** |
34 | 0.606 | 49.23 *** |
Loans to non-financial corporations | −1.01 |
34 | 0.001 | 0.04 |
Loans to other domestic sectors | 12.56 ** |
34 | 0.140 | 5.23 ** |
Loans to central bank | −4.07 *** |
34 | 0.213 | 8.65 *** |
Loans to general government | −0.68 |
34 | 0.000 | 0.00 |
Loans to non-residents | −48.54 *** |
34 | 0.315 | 14.76 *** |
NPL to total gross loans | 0.02 *** |
34 | 0.361 | 18.13 *** |
NPL net of provisions to capital | 0.07 *** |
34 | 0.271 | 11.18 *** |
The effects of uncertainty on loan supply and NPLs in Ireland.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | 304.65 *** |
27 | 0.234 | 7.67 *** |
Loans to residents | 191.77 *** |
27 | 0.261 | 8.83 *** |
Loans to deposit-takers | 73.97 ** |
27 | 0.184 | 5.66 ** |
Loans to financial corporations | 20.38 *** |
27 | 0.334 | 12.53 *** |
Loans to non-financial corporations | 47.81 *** |
27 | 0.293 | 10.38 *** |
Loans to other domestic sectors | 28.90 *** |
27 | 0.246 | 8.19 *** |
Loans to central bank | −2.62 |
27 | 0.022 | 0.56 |
Loans to general government | 23.37 *** |
27 | 0.209 | 6.61 *** |
Loans to non-residents | 112.87 ** |
27 | 0.194 | 6.05 ** |
NPL to total gross loans | 0.01 |
27 | 0.001 | 0.01 |
NPL net of provisions to capital | 0.03 *** |
27 | 0.238 | 7.84 *** |
The effects of uncertainty on loan supply and NPLs in Italy.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | 79.71 |
40 | 0.038 | 1.52 |
Loans to residents | 57.65 ** |
40 | 0.119 | 5.18 ** |
Loans to deposit-takers | −31.07 *** |
40 | 0.491 | 36.74 *** |
Loans to financial corporations | 1.87 |
40 | 0.001 | 0.02 |
Loans to non-financial corporations | 19.18 |
40 | 0.029 | 1.13 |
Loans to other domestic sectors | 70.70 *** |
40 | 0.226 | 11.13 *** |
Loans to central bank | −2.13 |
40 | 0.017 | 0.69 |
Loans to general government | −0.89 |
40 | 0.001 | 0.04 |
Loans to non-residents | 22.04 |
40 | 0.004 | 0.15 |
NPL to total gross loans | 0.01 *** |
43 | 0.215 | 11.27 *** |
NPL net of provisions to capital | 0.04 *** |
43 | 0.243 | 13.20 *** |
The effects of uncertainty on loan supply and NPLs in Latvia.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | 1.93 * |
24 | 0.112 | 2.80 * |
Loans to residents | 2.03 |
24 | 0.086 | 2.08 |
Loans to deposit-takers | 0.10 |
24 | 0.064 | 1.52 |
Loans to financial corporations | −0.27 |
24 | 0.099 | 2.42 |
Loans to non-financial corporations | 1.00 |
24 | 0.086 | 2.09 |
Loans to other domestic sectors | 1.19 |
24 | 0.103 | 2.53 |
Loans to central bank | - | - | - | - |
Loans to general government | 0.01 |
24 | 0.003 | 0.08 |
Loans to non-residents | −0.09 |
24 | 0.001 | 0.01 |
NPL to total gross loans | 0.01 |
24 | 0.074 | 1.77 |
NPL net of provisions to capital | 0.016 |
24 | 0.051 | 1.16 |
The effects of uncertainty on loan supply and NPLs in Lithuania.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −4.27*** |
32 | 0.419 | 21.71*** |
Loans to residents | −4.27*** |
32 | 0.419 | 21.71*** |
Loans to deposit-takers | −0.16 |
32 | 0.032 | 1.00 |
Loans to financial corporations | −0.04*** |
32 | 0.225 | 8.74*** |
Loans to non-financial corporations | −1.75*** |
32 | 0.328 | 14.66*** |
Loans to other domestic sectors | −1.98*** |
32 | 0.301 | 12.91*** |
Loans to central bank | −0.42 |
32 | 0.037 | 1.17 |
Loans to general government | 0.083 |
32 | 0.009 | 0.30 |
Loans to non-residents | - | - | - | - |
NPL to total gross loans | 0.01 |
32 | 0.074 | 2.40 |
NPL net of provisions to capital | 0.01 |
32 | 0.001 | 0.04 |
The effects of uncertainty on loan supply and NPLs in Luxembourg.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −31.14 ** |
32 | 0.150 | 5.31 ** |
Loans to residents | −24.07 * |
32 | 0.089 | 2.95 * |
Loans to deposit-takers | −15.71 |
32 | 0.063 | 2.02 |
Loans to financial corporations | 0.59 |
32 | 0.001 | 0.04 |
Loans to non-financial corporations | −2.15 |
32 | 0.051 | 1.61 |
Loans to other domestic sectors | 0.56 |
32 | 0.001 | 0.05 |
Loans to central bank | −6.50 |
32 | 0.007 | 0.21 |
Loans to general government | −0.10 |
32 | 0.019 | 0.61 |
Loans to non-residents | −7.09 |
32 | 0.010 | 0.32 |
NPL to total gross loans | −0.01 *** |
20 | 0.385 | 11.30 *** |
NPL net of provisions to capital | −0.01 ** |
20 | 0.280 | 7.03 ** |
The effects of uncertainty on loan supply and NPLs in Malta.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | 3.38 *** |
47 | 0.331 | 22.76 *** |
Loans to residents | 3.00 *** |
48 | 0.409 | 31.93 *** |
Loans to deposit-takers | −0.01 |
48 | 0.001 | 0.06 |
Loans to financial corporations | 0.20 *** |
48 | 0.322 | 21.91 *** |
Loans to nonfinancial corporations | 0.67 *** |
48 | 0.386 | 29.00 *** |
Loans to other domestic sectors | 1.59 *** |
48 | 0.480 | 42.56 *** |
Loans to central bank | 0.43 * |
48 | 0.059 | 2.90 * |
Loans to general government | 0.11 * |
48 | 0.065 | 3.21 * |
Loans to non-residents | 0.38 * |
48 | 0.066 | 3.27 * |
NPL to total gross loans | 0.01 |
48 | 0.001 | 0.04 |
NPL net of provisions to capital | 0.01 ** |
48 | 0.094 | 4.81 ** |
The effects of uncertainty on loan supply and NPLs in the Netherlands.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −31.11 |
36 | 0.008 | 0.28 |
Loans to residents | 56.15 |
36 | 0.061 | 2.22 |
Loans to deposit-takers | −21.93 *** |
36 | 0.320 | 16.02 *** |
Loans to financial corporations | 13.66 |
36 | 0.037 | 1.31 |
Loans to non-financial corporations | 14.85 ** |
36 | 0.110 | 4.22 ** |
Loans to other domestic sectors | 7.67 |
36 | 0.014 | 0.49 |
Loans to central bank | 36.66 |
36 | 0.054 | 1.94 |
Loans to general government | 5.28 * |
36 | 0.073 | 2.70 * |
Loans to non-residents | −87.23 ** |
36 | 0.132 | 5.17 ** |
NPL to total gross loans | 0.01 *** |
36 | 0.247 | 11.17 *** |
NPL net of provisions to capital | 0.01 *** |
36 | 0.190 | 8.00 *** |
The effects of uncertainty on loan supply and NPLs in Portugal.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −18.36 |
36 | 0.016 | 0.55 |
Loans to residents | −4.84 |
35 | 0.002 | 0.07 |
Loans to deposit-takers | 0.88 |
35 | 0.002 | 0.08 |
Loans to financial corporations | −1.14 |
35 | 0.016 | 0.53 |
Loans to non-financial corporations | −5.37 |
35 | 0.011 | 0.37 |
Loans to other domestic sectors | −0.93 |
35 | 0.001 | 0.02 |
Loans to central bank | −0.57 |
35 | 0.012 | 0.40 |
Loans to general government | 2.29 |
35 | 0.066 | 2.34 |
Loans to non-residents | −2.28 |
35 | 0.003 | 0.09 |
NPL to total gross loans | 0.01 |
30 | 0.011 | 0.32 |
NPL net of provisions to capital | 0.01 |
30 | 0.025 | 0.71 |
The effects of uncertainty on loan supply and NPLs in Slovakia.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | −1.59 |
24 | 0.004 | 0.10 |
Loans to residents | −1.26 |
24 | 0.003 | 0.07 |
Loans to deposit-takers | 0.01 |
24 | 0.001 | 0.04 |
Loans to financial corporations | 0.02 |
24 | 0.002 | 0.06 |
Loans to non-financial corporations | 0.11 |
24 | 0.002 | 0.04 |
Loans to other domestic sectors | −1.43 |
24 | 0.004 | 0.10 |
Loans to central bank | - | - | - | - |
Loans to general government | 0.03 |
24 | 0.009 | 0.21 |
Loans to non-residents | −0.33 |
24 | 0.017 | 0.38 |
NPL to total gross loans | −0.01 |
24 | 0.001 | 0.01 |
NPL net of provisions to capital | −0.01 |
24 | 0.035 | 0.81 |
The effects of uncertainty on loan supply and NPLs in Slovenia.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | 15.16 ** |
25 | 0.222 | 6.56 ** |
Loans to residents | 14.26 ** |
25 | 0.216 | 6.34 ** |
Loans to deposit-takers | 2.31 ** |
25 | 0.213 | 6.25 ** |
Loans to financial corporations | 1.52 ** |
25 | 0.224 | 6.64 ** |
Loans to non-financial corporations | 10.56 ** |
25 | 0.199 | 5.73 ** |
Loans to other domestic sectors | 0.71 ** |
25 | 0.199 | 5.75 ** |
Loans to central bank | −0.70 |
25 | 0.068 | 1.69 |
Loans to general government | −0.15 |
25 | 0.003 | 0.08 |
Loans to non-residents | 0.89 * |
25 | 0.115 | 3.00 * |
NPL to total gross loans | 0.01 |
25 | 0.001 | 0.03 |
NPL net of provisions to capital | 0.04 |
25 | 0.082 | 2.06 |
The effects of uncertainty on loan supply and NPLs in Spain.
Dependent var. | Uncertainty | N | R2 | F-stat |
---|---|---|---|---|
Total gross loans | 198.84 |
45 | 0.035 | 1.58 |
Loans to residents | −63.28 |
45 | 0.007 | 0.32 |
Loans to deposit-takers | 14.40 |
45 | 0.024 | 1.08 |
Loans to financial corporations | - | - | - | - |
Loans to non-financial corporations | - | - | - | - |
Loans to other domestic sectors | −222.97 ** |
45 | 0.099 | 4.74 ** |
Loans to central bank | −1.50 |
45 | 0.001 | 0.04 |
Loans to general government | 146.78 *** |
45 | 0.171 | 8.91 *** |
Loans to non-residents | - | - | - | - |
NPL to total gross loans | 0.01 *** |
45 | 0.151 | 7.68 *** |
NPL net of provisions to capital | 0.02 ** |
45 | 0.113 | 5.52 ** |
The data for NPLs net of provisions to capital were taken from the World Bank for Germany and from TheGlobalEconomy.com for Finland.
This variable was calculated by taking the value of NPLs less the value of specific loan provisions as the numerator and capital as the denominator. Capital was measured as total capital and reserves on the sector balance sheet.
The increase of uncertainty index (UI) by country after the onset of the 2008 global financial crisis.
Descriptive statistics on the stock market indexes.
Obs. | Median | Average | SD | Min. | Max. | |
---|---|---|---|---|---|---|
AS51 Index | 2972 | 4936.34 | 4936.39 | 674.33 | 3145.50 | 6828.70 |
BEL20 Index | 3020 | 3073.52 | 3056.05 | 705.87 | 1527.27 | 4756.82 |
CYSMFTSE Index | 2927 | 341.99 | 440.48 | 481.44 | 32.59 | 1891.48 |
TALSE Index | 2961 | 677.53 | 692.92 | 182.06 | 244.99 | 1049.39 |
HEX25 Index | 2966 | 2467.26 | 2520.68 | 548.87 | 1189.09 | 3647.13 |
CAC Index | 3020 | 4206.77 | 4231.64 | 748.88 | 2519.29 | 6168.15 |
DAX Index | 3001 | 6947.72 | 7304.25 | 2008.58 | 3666.41 | 12,374.73 |
FTASE Index | 2916 | 7164.10 | 10,110.08 | 8361.08 | 1141.30 | 28,412.30 |
ISEQ Index | 2989 | 4817.42 | 5024.97 | 2016.11 | 1916.38 | 9968.48 |
FTSEMIB Index | 2997 | 21,184.60 | 24,204.03 | 8426.89 | 12,362.51 | 44,364.00 |
RIGSE Index | 2940 | 438.25 | 472.78 | 128.39 | 203.16 | 764.50 |
VILSE Index | 2940 | 438.25 | 472.78 | 128.39 | 203.16 | 764.50 |
LUXXX Index | 2979 | 1454.61 | 1525.48 | 378.98 | 804.39 | 2578.24 |
MALTEX Index | 2914 | 3507.05 | 3856.13 | 775.31 | 2643.38 | 6641.87 |
AEX Index | 3020 | 391.34 | 389.73 | 76.16 | 199.25 | 561.90 |
PSI20 Index | 3020 | 7107.76 | 7387.82 | 2241.11 | 4260.13 | 13,702.00 |
SBITOP Index | 2941 | 823.96 | 988.66 | 488.14 | 501.27 | 2674.69 |
SKSM Index | 2904 | 278.26 | 300.74 | 95.58 | 178.65 | 507.98 |
IBEX Index | 3011 | 10,204.90 | 10,357.68 | 2011.83 | 5956.30 | 15,945.70 |
SPX Index | 2945 | 1362.21 | 1469.61 | 371.15 | 676.53 | 2241.35 |
SPTSX60 Index | 2942 | 728.02 | 728.49 | 97.61 | 458.13 | 900.98 |
MEXBOL Index | 2947 | 35,020.74 | 33,320.06 | 9948.44 | 11,739.99 | 48,694.90 |
IBOV Index | 2902 | 53,813.51 | 52,083.34 | 11,744.81 | 23,609.97 | 73,516.81 |
SX5E Index | 3021 | 3020.69 | 3098.87 | 577.24 | 1809.98 | 4557.57 |
UKX Index | 2975 | 5912.15 | 5867.51 | 723.99 | 3512.09 | 7103.98 |
NKY Index | 2845 | 13,500.46 | 13,311.56 | 3515.54 | 7054.98 | 20,868.03 |
HSI Index | 2911 | 21,354.66 | 20,693.64 | 3590.87 | 11,015.84 | 31,638.22 |
BSE SENSEX Index | 2883 | 17,622.45 | 17,845.68 | 6047.09 | 6102.74 | 29,681.77 |
Descriptive statistics of the basic variables of the analysis.
Obs. | Median | Average | SD | Min. | Max. | |
---|---|---|---|---|---|---|
912 | 235.41 | 238.40 | 339.55 | −1196.45 | 1103.51 | |
629 | 368,248.73 | 1,035,974.42 | 1,565,715.59 | 5421.16 | 7,009,210.00 | |
622 | 229,970.27 | 692,868.58 | 1,137,959.72 | 4925.66 | 5,384,266.72 | |
577 | 9820.04 | 40,242.25 | 63,762.97 | 12.82 | 261,183.53 | |
622 | 5377.14 | 52,668.79 | 110,462.34 | 28.56 | 497,283.40 | |
613 | 113,481.00 | 305,379.58 | 507,238.90 | 1946.49 | 1,919,547.66 | |
613 | 3949.19 | 24,865.75 | 62,945.46 | 0.00 | 567,333.51 | |
622 | 12,731.50 | 104,000.39 | 286,058.85 | 0.00 | 1,418,531.60 | |
577 | 45,673.27 | 172,098.20 | 272,923.40 | 2586.84 | 1,131,705.69 | |
613 | 88,017.31 | 302,294.07 | 422,959.48 | 0.00 | 1,779,849.15 | |
565 | 5.53 | 8.55 | 8.66 | 0.15 | 47.75 | |
588 | 26.99 | 39.78 | 47.74 | −12.00 | 413.56 |
Note: NPL: non-performing loan.
Fixed effects method using simple standard errors.
Dependent Var. | Uncertainty | |||
---|---|---|---|---|
Total gross loans | 49.45 ** |
629 | 0.031 | 9.79 *** |
Loans to residents | −30.64 * |
622 | 0.015 | 4.59 * |
Loans to deposit-takers | −8.44 * |
622 | 0.018 | 5.47 *** |
Loans to financial corporations | 5.97 *** |
577 | 0.015 | 4.33 ** |
Loans to non-financial corporations | −5.55 |
577 | 0.002 | 0.76 |
Loans to other domestic sectors | −21.28 ** |
613 | 0.009 | 2.82 * |
Loans to central bank | −2.33 |
613 | 0.019 | 5.78 *** |
Loans to general government | 2.99 |
622 | 0.086 | 28.52 *** |
Loans to non-residents | −22.95 ** |
613 | 0.028 | 8.57 *** |
NPL to total gross loans | 0.003 *** |
565 | 0.135 | 42.69 *** |
NPL net of provisions to capital | 0.019 *** |
588 | 0.081 | 25.25 *** |
Correlation of each dependent variable with UI by country.
Total Gross Loans | Residents | Deposit-Takers | Financial Corporations | Non-Financial Corporations | Other Domestic Sectors | Central Bank | General Government | Non-Residents | NPL to Total Gross Loans | NPL Net of Provisions to Capital | |
---|---|---|---|---|---|---|---|---|---|---|---|
Austria | 0.170 | 0.214 | 0.226 | 0.098 | 0.111 | −0.242 | 0.002 | −0.130 | 0.106 | −0.119 | −0.217 |
Belgium | −0.239 | −0.127 | −0.092 | −0.095 | |||||||
Cyprus | −0.252 | −0.106 | 0.299 | 0.206 | 0.113 | ||||||
Estonia | −0.118 | 0.194 | −0.265 | ||||||||
Finland | 0.212 | 0.171 | −0.244 | 0.283 | 0.099 | 0.192 | 0.081 | 0.003 | 0.252 | ||
France | 0.058 | −0.152 | −0.208 | −0.117 | − | − | −0.161 | − | −0.122 | ||
Germany | −0.206 | −0.136 | −0.182 | 0.224 | −0.208 | −0.220 | 0.019 | 0.070 | − | ||
Greece | 0.015 | −0.036 | −0.011 | ||||||||
Ireland | −0.148 | 0.017 | |||||||||
Italy | 0.196 | 0.020 | 0.170 | −0.133 | −0.033 | 0.063 | |||||
Latvia | 0.294 | 0.254 | 0.294 | 0.000 | 0.061 | −0.019 | 0.273 | 0.224 | |||
Lithuania | −0.180 | −0.194 | 0.099 | 0.000 | 0.191 | ||||||
Luxembourg | −0.299 | −0.251 | 0.037 | −0.225 | 0.040 | −0.084 | −0.141 | −0.103 | |||
Malta | −0.037 | 0.244 | 0.255 | 0.258 | 0.031 | ||||||
Netherlands | −0.090 | 0.247 | 0.192 | 0.119 | 0.232 | 0.271 | |||||
Portugal | −0.049 | −0.045 | 0.050 | −0.126 | −0.105 | −0.026 | −0.110 | 0.258 | −0.053 | 0.106 | 0.158 |
Slovakia | −0.068 | −0.057 | 0.041 | 0.051 | 0.042 | −0.068 | 0.000 | 0.098 | −0.131 | −0.025 | −0.188 |
Slovenia | −0.261 | −0.060 | 0.033 | 0.287 | |||||||
Spain | 0.188 | −0.086 | 0.156 | − | − | −0.029 |
Note: Bold is used to indicate in correlations above 0.3 or below −0.3.