EPU is transmitted to the real economy
Hence, banks could turn out to be a central channel through which EPU is
transmitted to the real economy. EPU’s negative spillovers are not only possible
via heightened stock market volatility and higher bond spreads, but also through
subdued funding of the private sector. Considering the cyclicality dimension,
elevated EPU might intensify the impact of recessions via restrained bank
lending.
EU Forecast
euf:ba18.d:25/nws-01