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Economic Policy Uncertainty and Banks' Interest Income: Empirical Evidence from an International Panel Dataset

Author

Listed:
  • Whelsy Boungou

    (PSB Paris School of Business)

  • Charles Mawusi

    (University of Bordeaux)

Abstract

In this paper, we provide the first cross-country empirical evidence on the relationship between economic policy uncertainty (EPU) and banks' interest income activities (measured using the net interest income). Using bank-level panel data of 3,252 banks in 16 economies over the period 2009-2018, we show that EPU has a negative and statistically significant effect on banks' net interest income (NII). Specifically, we find that banks' NII decreases as the level of EPU increases. We also show that this reduction is due to the reduction in other interest income which is only partially offset by the reduction in other interest expense. Finally, our results show that the reduction in banks' net interest income (associated with an increase in EPU) is stronger for banks located in countries where negative interest rates are in place.

Suggested Citation

  • Whelsy Boungou & Charles Mawusi, 2021. "Economic Policy Uncertainty and Banks' Interest Income: Empirical Evidence from an International Panel Dataset," Economics Bulletin, AccessEcon, vol. 41(3), pages 2003-2011.
    • Handle: RePEc:ebl:ecbull:eb-21-00488
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    References listed on IDEAS

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    Cited by:

    1. Whelsy Boungou & Charles Mawusi, 2022. "The impact of economic policy uncertainty on banks' non-interest income activities," International Economics, CEPII research center, issue 169, pages 89-97.

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    More about this item

    Keywords

    Economic Policy Uncertainty; Banking; Interest Income Activities; Panel Data;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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