Journal article
The impact of macroprudential policies on bank risk under economic uncertainty: Evidence from emerging Asian economies
Journal of the Asia Pacific economy, v ahead-of-print(ahead-of-print), pp 1-32
30 Dec 2021
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This paper examines the impact of macroprudential policies on the nexus between economic uncertainty and bank risk in emerging Asian economies. We construct our index of economic uncertainty by applying the Generalized Autoregressive Conditional Heteroskedasticity (GARCH)-in-mean model to a series of important macroeconomic variables, and borrow macroprudential policy indices from Cerutti et al. (2017) and Alam et al. (2019). Using bank-level panel data from approximately 600 commercial banks in 11 emerging Asian economies during the period 2000-2016, we find consistent evidence that bank risk increases with economic uncertainty, while macroprudential measures play an ameliorative role in uncertainty-induced bank risk. Our baseline findings are largely driven by macroprudential measures that aim to dampen the credit cycle more than those that target increasing the resilience of the banking sector. Our further analyses of the heterogeneous impacts of macroprudential measures by specific type on the risk of banks show that liquidity-based instruments, reserve requirements and currency instruments play a more conspicuous role in the economic uncertainty‒bank risk nexus than capital-based and asset-side macroprudential instruments.
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Details
- Title
- The impact of macroprudential policies on bank risk under economic uncertainty: Evidence from emerging Asian economies
- Creators
- Bang Nam Jeon - Drexel UniversityYao Yao - Southwestern University of Finance and EconomicsMinghua Chen - Southwestern University of Finance and EconomicsJi Wu - Southwestern University of Finance and Economics
- Publication Details
- Journal of the Asia Pacific economy, v ahead-of-print(ahead-of-print), pp 1-32
- Publisher
- Routledge
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000758685600001
- Scopus ID
- 2-s2.0-85125379159
- Other Identifier
- 991019330627304721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics