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Economic policy uncertainty and financial stability–Is there a relation?
journal contribution
posted on 2021-01-01, 00:00 authored by D H B Phan, Bernard Njindan Iyke, Susan SharmaSusan Sharma, Y Affandi© 2020 Elsevier B.V. This paper investigates the impact of economic policy uncertainty on financial stability. Using data for 23 countries over the period of 1996 to 2016, we show that the impact is negative and statistically significant. Economically, a unit standard deviation increase in economic policy uncertainty decreases financial stability by between 2.66% and 7.26% of its sample mean. The negative impact of economic policy uncertainty on financial stability is stronger for countries with higher competition, lower regulatory capital, and smaller financial systems. We show that our finding is robust using bank-level data and different constructions of global panel portfolios, and controlling for Z-score skewness, the Global Financial Crisis, and for endogeneity.
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Journal
Economic ModellingVolume
94Pagination
1018 - 1029Publisher
ElsevierLocation
Amsterdam, The NetherlandsPublisher DOI
ISSN
0264-9993Language
engPublication classification
C1 Refereed article in a scholarly journal; C Journal articleUsage metrics
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