The Risk-Taking Channel in Colombia Revisited

Martha López, Fernando Tenjo () and Hector Zarate-Solano

No 9313, Borradores de Economia from Banco de la Republica

Abstract: Levels of interest rates below historical norms may have enhanced financial instability in developed and developing economies during the 2000's. The risk taking channel of monetary policy transmission is a recent theory that explains the interaction between risk perceptions of the financial system and monetary policy. This paper presents empirical evidence of the risk taking channel of monetary policy using detailed information on consumer and commercial loans from the Colombian banking system. Using probit and duration models we find that the banking system takes on more risk when the level of interest rates are too low. We also find that the response to interest rates is higher in the case of commercial loans.

Keywords: Monetary policy; lending standards; risk taking; duration analysis; probit models. (search for similar items in EconPapers)
JEL-codes: E44 G21 L14 (search for similar items in EconPapers)
Pages: 57
Date: 2012-02-07
New Economics Papers: this item is included in nep-ban, nep-lam and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Journal Article: The Risk-taking Channel in Colombia Revisited (2012)
Journal Article: The Risk-taking Channel in Colombia Revisited (2012)
Working Paper: The Risk-Taking Channel in Colombia Revisited (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:009313

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