Public policy and financial stability: the impact of PCA and TARP on U.S. bank non-performing loans

Jiang, Chunxia and Kanas, Angelos and Molyneux, Philip (2018) Public policy and financial stability: the impact of PCA and TARP on U.S. bank non-performing loans. International Journal of Finance & Economics, 23 (4). pp. 376-392. ISSN 1076-9307

[img] PDF - Final accepted version (with author's formatting)
Restricted to Repository staff and depositor only until 14 March 2020.

Download (560kB) |

Abstract

This study explores the implications of Prompt Corrective Action (PCA) and the Troubled Asset Relief Program (TARP) on the behavior of non-performing loans (NPLs) and real estate non-performing loans (RELs) in the U.S. over 1984-2015 using a Markov switching framework. We find that NPLs and RELs exhibit pronounced episodic behavior switching between non-stationary and stationary regimes. PCA and TARP have a significant impact on banking sector stability by influencing the probability of switching from non-stationary regimes to stationary regimes and by reducing the level of NPLs and RELs. These results are robust to various model specifications and have important implications for bank regulation as well as for the formulation of macro stress-testing.

Item Type: Article
Research Areas: A. > Business School > Economics
Item ID: 23529
Notes on copyright: This is the peer reviewed version of the following article:Jiang C, Kanas A, Molyneux P. Public policy and financial stability: The impact of PCA and TARP on U.S. bank non‐performing loans. Int J Fin Econ. 2018;1–17. https://doi.org/10.1002/ijfe.1622, which has been published in final form at https://doi.org/10.1002/ijfe.1622. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Useful Links:
Depositing User: Chunxia Jiang
Date Deposited: 12 Feb 2018 16:35
Last Modified: 18 Nov 2018 17:57
URI: http://eprints.mdx.ac.uk/id/eprint/23529

Actions (login required)

Edit Item Edit Item

Full text downloads (NB count will be zero if no full text documents are attached to the record)

Downloads per month over the past year