The Impact of Macro Economic uncertainty On Bank Lending Behavior (The Case Of Iran)

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.