Journal article
Economic uncertainty, public debt and non-performing loans in the Eurozone: Three systemic crises
International review of financial analysis, v 93, 103208
May 2024
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Recent systemic crises, from the Global Financial Crisis to Covid19 pandemic, have put geoeconomic uncertainty to the forefront of financial services decision-making and planning. Yet, to-date, research connecting economic policy uncertainty to banking sector risks and performance metrics is lacking. This paper examines the relationship between the Economic Policy Uncertainty Index on the non-performing loans across 19 Eurozone member states, using panel data for 194 banks during the 2001–2021 period. As the crises covered were endogenous to the banking sector regulatory and operational environments, we introduce a novel control for the interaction between crises severity and duration, and banking sector strategic and operating environment. This control is proxied by public debt changes which reflect fiscal measures deployed to ameliorate effects of the crises. We find that rising EPU during the crises is associated with higher NPLs and government debt. We also document how this relationship is changing over time and across different crises.
•There is a complex, nonlinear & evolving relationship between economic policy uncertainty, systemic crises & NPLs.•Crisis-related uncertainty transmission to higher NPLs has moderated over time, and across crises.•Fiscal policy remains the most important mechanism for addressing exogenous to the financial system crises such as COVID-19.•Non-linear impacts of economic uncertainty, crises & fiscal policy responses to NPLs are contingent on public debt levels.
Metrics
Details
- Title
- Economic uncertainty, public debt and non-performing loans in the Eurozone: Three systemic crises
- Creators
- Veton Zeqiraj - Faculty of Economics, University of Prishtinë, Republic of KosovoConstantin Gurdgiev - University of Northern ColoradoKazi Sohag - Ural Federal UniversityShawkat Hammoudeh - Drexel University
- Publication Details
- International review of financial analysis, v 93, 103208
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:001204491000001
- Scopus ID
- 2-s2.0-85188176989
- Other Identifier
- 991021863133904721
UN Sustainable Development Goals (SDGs)
This publication has contributed to the advancement of the following goals:
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance