Monetary policy uncertainty, market structure and bank risk-taking: Evidence from China

Xinyu Ge, Yan Liu and Jiali Zhuang

Finance Research Letters, 2023, vol. 52, issue C

Abstract: We identify the impact of monetary policy uncertainty (MPU) on bank risk-taking by exploiting the regional heterogeneity of bank market structure in China. Our findings show that a bank facing more competition will take more risks following an increase in MPU, compared with a bank facing less competition, thus confirm a positive impact of MPU on bank risk-taking. In addition, we find that MPU positively affects bank risk-taking by deteriorating its profitability and balance sheet. These findings suggest that the central bank can alleviate bank risks by enhancing the transparency of monetary policy.

Keywords: Monetary policy uncertainty; Market structure; Bank risk-taking; Regional heterogeneity (search for similar items in EconPapers)
JEL-codes: E52 G21 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007759

DOI: 10.1016/j.frl.2022.103599

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