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Do global and local economic policy uncertainties matter for systemic risk in the international banking system

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  • Deng, Yuanyue
  • Li, Sijing

Abstract

Using panel data from 60 countries spanning from January 2006 to December 2021, we investigate how economic policy uncertainties (EPUs) affect two subcomponents of systemic risk (systemic linkage and individual risk), and differentiate the influences resulting from global and local EPU shocks. Our findings demonstrate that increased global shocks result in higher systemic linkages, while domestic uncertainties significantly contribute to individual risks. Cross-border bank loans and non-performing loans serve as the channels through which EPUs induce cascading effects. Moreover, heterogeneity analysis reveals the roles of financial openness and financial development in shaping the EPUs–systemic risk nexus.

Suggested Citation

  • Deng, Yuanyue & Li, Sijing, 2024. "Do global and local economic policy uncertainties matter for systemic risk in the international banking system," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011248
    DOI: 10.1016/j.frl.2023.104752
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    More about this item

    Keywords

    Banking system; Economic policy uncertainty; Individual risk; Systemic linkage;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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