The Heterogeneity of European Bank Lending and the Role of Economic Policy Uncertainty

Abstract

The paper examines the relationship between bank lending activity and economic-policy uncertainty, using data from 1998 to 2018 for 7,844 banks from the European Union (28). Our findings demonstrate a negative impact of European uncertainty on bank lending. Importantly, we observe heterogeneity within the EU. While the impact on Western European countries is statistically significant, this effect has not been confirmed for Central and Eastern European Countries. This heterogeneity is also evident using different model specifications.