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<p>This paper examines the impact of economic policy uncertainty on bank wholesale funding and explores the moderating role of the quality of political signals. Using a sample of 431 commercial banks in the United States over the period 2003–2021, we find robust evidence of a negative relationship between policy uncertainty and bank wholesale funding. Delving into this relationship, news-based policy uncertainty, government expenditure uncertainty, tax uncertainty, and inflation uncertainty appear to reduce the share of bank wholesale funding, leaving banks with higher liquidity and refinancing risks. Our results show that policy uncertainty generates noisy public signals that prompt wholesale financiers to withdraw or refrain from rolling over funds, particularly for banks with weaker asset quality and greater insolvency risk. However, this adverse effect is weaker in environments with low-quality political signals, where wholesale creditors have fewer incentives to update their investment sentiments and adjust financing decisions in response to heightened economic policy uncertainty. Overall, the findings highlight that the link between policy uncertainty and wholesale funding critically depends on the credibility of political signals.</p>

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Economic policy uncertainty and bank wholesale funding: Does the quality of political signals matter?

  • 期刊论文

  • 发表日期：

    2026年7月16日

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  • Thanh Cong Nguyena,
  • Hong Chi Mai,
  • Thi Ngoc Phuong Nguyen

摘要

This paper examines the impact of economic policy uncertainty on bank wholesale funding and explores the moderating role of the quality of political signals. Using a sample of 431 commercial banks in the United States over the period 2003–2021, we find robust evidence of a negative relationship between policy uncertainty and bank wholesale funding. Delving into this relationship, news-based policy uncertainty, government expenditure uncertainty, tax uncertainty, and inflation uncertainty appear to reduce the share of bank wholesale funding, leaving banks with higher liquidity and refinancing risks. Our results show that policy uncertainty generates noisy public signals that prompt wholesale financiers to withdraw or refrain from rolling over funds, particularly for banks with weaker asset quality and greater insolvency risk. However, this adverse effect is weaker in environments with low-quality political signals, where wholesale creditors have fewer incentives to update their investment sentiments and adjust financing decisions in response to heightened economic policy uncertainty. Overall, the findings highlight that the link between policy uncertainty and wholesale funding critically depends on the credibility of political signals.