The Impact of Economic Policy Uncertainty on Working Capital and Bank Stability: Evidence from Pakistan

Abstract

The purpose of this research is to examine how uncertain economic policies (EPU) influence the funds available for a company's day-to-day operations (WC) and the stability of banks (BS). This research used a mix of static and dynamic analysis methods on data collected from 2010 to 2022. It was found that EPU negatively impacts the stability of banks, with this result being consistent across three different statistical tests at a 5% significance level. Additionally, the research shows that EPU positively affects how much working capital a bank has. These insights are important for those making economic policies, financial institutions, and companies in unpredictable economic situations.