Document Type : Research Paper

Authors

• Mohsen Mehrara ¹
• Elham Sehati ²

¹ Associate Professor, University of Tehran

² M.S. in Planning and Developing Economic

Abstract

In this paper we empirically investigate the link between bank lending
behavior and macroeconomic uncertainty. This relationship is
examined using conditional variance model based on monthly data for
a panel of Iranian banks during the period 1383-1388. The results
indicate that the uncertainty based on CPI and PPI indicators,
implying uncertainty in macroeconomics, has a negative significant
effect on bank lending behavior. In other words, banks decrease their
lending ratios when macroeconomic uncertainty increases,
becomming more conservative. The increase of uncertainty leads to
credit risk of banks and the probability of losses due to unsafe loans
and decrease in credits volume and the loans to the private sector.

Keywords

• Macroeconomic Uncertainty
• Bank Lending Behavior
• ARCH