Uncertainty weakens bank lending channel, Bank of Italy paper says

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A working paper published by the Bank of Italy investigates the effects of uncertainty on commercial banks’ willingness to lend to companies.

In Bank lending in uncertain times, Piergiorgio Alessandri and Margherita Bottero use a monthly dataset showing all loan applications submitted between 2003 and 2012 by a sample of 650,000 Italian firms.

The authors then examine whether uncertainty in the banking market affected the banks’ willingness to make loans to the sampled firms. They begin by tes