The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

Manthos Delis (), Iftekhar Hasan and Nikolaos Mylonidis

MPRA Paper from University Library of Munich, Germany

Abstract: There is a growing consensus that a prolonged period of low interest rates can exert a negative impact on financial stability through the risk-taking incentives of banks. Using micro-level datasets from the US banking sector, this paper finds evidence of a highly significant negative relationship between monetary policy rates and bank-risk taking. This finding remains robust across various specifications, sub-periods and subsamples, thereby confirming the presence of an active risk-taking channel of monetary policy since the 1990s. The results, therefore, support the new responsibilities of the Fed on macro-prudential supervision to monitor systemic risks.

Keywords: Bank risk; monetary policy; US commercial banks; Total loans; New loans (search for similar items in EconPapers)
JEL-codes: E43 E52 G01 G21 (search for similar items in EconPapers)
Date: 2011-10-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cis, nep-eff, nep-mac and nep-mon
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34084

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