Hazardous times for monetary policy: What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking?

Gabriel Jimenez, Steven Ongena, Jose-Luis Peydro and Jesús Saurina

No 833, Working Papers from Banco de España

Abstract: We identify the impact of short-term interest rates on credit risk-taking by analyzing a comprehensive credit register from Spain, a country where for the last twenty years monetary policy was mostly decided abroad. Discrete choice, within borrower comparison and duration analyses show that lower overnight rates prior to loan origination lead banks to lend more to borrowers with a worse credit history and to grant more loans with a higher per period probability of default. Lower overnight rates during the life of the loan reduce this probability. Bank, borrower and market characteristics determine the impact of overnight rates on credit risk-taking.

Keywords: monetary policy; low interest rates; financial stability; lending standards; credit risk-taking; credit composition; business cycle; liquidity risk (search for similar items in EconPapers)
JEL-codes: E44 E5 G21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2009-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac, nep-mon and nep-rmg
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Citations: View citations in EconPapers (50)

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Related works:
Journal Article: Hazardous Times for Monetary Policy: What Do Twenty‐Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk‐Taking? (2014)
Journal Article: Hazardous times for monetary policy: what do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0833

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