Variability in the impacts of partisan conflict: a new perspective from bank credit

Variability in the impacts of partisan conflict: a new perspective from bank credit

作者:Xuan Hua , Kai Shi , Li Nie and Meng Yan 刊名:Economic Research-Ekonomska Istraživanja 时间:2023,36(1)


The purpose of this article is to analyse the impact of partisan conflict on bank credit, and  take the global financial crisis as the time node to analyse the variability of this impact  before and after the financial crisis. This article examines the impacts of partisan conflict on the bank credit by employing the US data covering the past 40 years and captures the variability in the effects of partisan conflict based on the rolling sample and time-varying  parameter  VAR analysis. The full sample results reveal that one standard deviation partisan conflict shock will shrink the bank credit growth rate to nonfinancial sectors, and the negative effects of partisan conflict on bank credit are more substantial after the global financial crisis. The rolling sample and time-varying parameter VAR analysis further confirm that the impacts of partisan conflict shock have varied substantially over time, where bank credit still negatively reacts to the impacts of partisan conflict in recent  periods. Additionally, we estimate two extended models and support the intermediate role of economic policy uncertainty in transm-itting the partisan conflict and the substitution effect of cross-border  bank lending on domestic bank credit. Finally, our major results are  unchanged by performing a series of robustness checks. The conclusion of this article is that partisan conflict has a significant impact on bank credit and shows obvious variability, which is more significant after the global financi-al crisis.

KEYWORDS: Partisan conflict; bank credit; rolling sample VARs;time-varying par ameter VARs; economic policyuncertainty

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