Description:
This study provides evidence for a long-term cointegrating relationship between the Economic Policy Uncertainty (EPU) components, non-performing loans (NPLs), unemployment, capital, and liquidity ratios in Greece. Our results remain consistent for mortgage and business NPLs. However, for consumer NPLs, this relationship is present only in cases of debt and tax policy uncertainties. Speed adjustment to long-run cointegrating relationship is much slower for consumer NPLs. Measures by authorities to reduce fiscal policy uncertainty can contribute to the effective management of NPLs and improvements in bank capital and liquidity variability