The Impact of Institutional Quality and Global Economic Policy Uncertainty on Bank Credit Growth

Abstract

This study examines the impact of institutional quality and global economic policy uncertainty (GEPU) on bank credit growth in a volatile economic environment. Panel data from 96 global banking systems for the period 2008 - 2023 are analysed using OLS, FEM, REM, FGLS, and GMM methods. Institutional quality is represented by six indicators: VOICE, POLITICAL, REQUA, GOVEF, LAW, and COR, while GEPU measures the degree of global economic policy uncertainty. The findings indicate that both institutional quality, through its six key indicators, and GEPU exert a positive influence on bank credit growth, providing additional empirical evidence that reinforces and extends the theoretical framework on the determinants of bank credit growth. From a practical perspective, the results assist policymakers and banks in developing credit strategies aligned with institutional conditions and the global environment, thereby improving the effectiveness of banking credit operations in uncertain contexts and fostering sustainable economic growth. A limitation of the study is that it does not conduct an in-depth analysis by bank type or regional characteristics, suggesting directions for future research.