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Macroeconomic Uncertainty and Bank Lending: The Case of Ukraine

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  • Oleksandr Talavera
  • Andriy Tsapin
  • Oleksandr Zholud

Abstract

Our study investigates the link between bank lending behavior and macroeconomic uncertainty. We develop a dynamic model of a bank's value maximization that results in a negative relationship between loan to capital ratio and macroeconomic uncertainty. This proposition is tested using a panel of Ukrainian banks collected from NBU and covering the period 2003q1-2005q3. The results indicate that banks increase their lending ratios when macroeconomic uncertainty decreases. We demonstrate that our results are robust with respect to the measurement of macroeconomic uncertainty. The reaction of banks to changes in uncertainty is not uniform and depends on bank-specific characteristics.

Suggested Citation

  • Oleksandr Talavera & Andriy Tsapin & Oleksandr Zholud, 2006. "Macroeconomic Uncertainty and Bank Lending: The Case of Ukraine," Discussion Papers of DIW Berlin 637, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp637
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    More about this item

    Keywords

    Banks; macroeconomic uncertainty; Ukraine; banks' balance sheets;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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