Can Low Interest Rates be Harmful: An Assessment of the Bank Risk-Taking Channel in Asia

Arief Ramayandi, Umang Rawat () and Hsiao Chink Tang ()
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Umang Rawat: Faculty of Economics, University of Cambridge, Postal: Austin Robinson Building, Sidgwick Avenue, Cambridge CB3 9DD, UK
Hsiao Chink Tang: Asian Development Bank, Postal: 6 ADB Avenue, 1550 Metro Manila, Philippines, http://www.adb.org

No 123, Working Papers on Regional Economic Integration from Asian Development Bank

Abstract: Events surrounding the global financial crisis have brought to light the potential role of monetary policy in precipitating the crisis. Numerous studies on advanced economies have documented a significant negative relationship between interest rates and bank risk-taking. This paper also finds the presence of the risk-taking channel based on a panel of publicly listed bank data in Asia. Using both annual and quarterly data, "too low" interest rates are found to lead to an increase in bank risk-taking.

Keywords: Bank risk-taking; interest rates; panel data; monetary policy; Asian banks (search for similar items in EconPapers)
JEL-codes: E43 E52 G21 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2014-01-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-mac, nep-mon and nep-sea
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbrei:0123

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