Only in Germany does the co-
movement of the two seem almost negligible.
To put the negative relation into
numbers, we perform a simple empirical analysis as well. We take monthly bank
loan flows to non-financial corporations as the dependent variable and EPU as
the single explanatory variable.14 Our results indicate that higher EPU lowers
bank loan flows at statistically significant levels (except in Germany, where the
effect is insignificant).
A moderate increase (10%) in EPU may translate into a
reduction of up to EUR 1 bn in monthly loan flows to non-financial corporations.
Our results are in line with the academic literature, which estimates a similar
negative relation (for the US), controlling for changes in the real economy and