Monetary Policy and Bank Risk-taking: Evidence from Emerging Economies

Ji Wu, Bang Jeon, Minghua Chen () and Rui Wang ()
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Minghua Chen: Research Institute of Economics and Management, Postal: Southwestern University of Finance & Economics, Chengdu, CHINA,
Rui Wang: Research Institute of Economics and Management, Postal: Southwestern University of Finance & Economics, Chengdu, CHINA,

No 2015-3, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: This paper addresses the impact of monetary policy on banks’ risk-taking by using the bank-level panel data from more than 1000 banks in 33 emerging economies during 2000-2012. We find that, consistent with the proposition of the “bank risk-taking channel” of monetary policy transmission, banks’ riskiness increases when monetary policy is eased. Bank risk-taking amid expansionary monetary policy is more conspicuous in small and less liquid banks, and in countries with a stronger deposit insurance scheme and a fixed exchange rate regime. We also find that the monetary policy-bank risk nexus is dampened in more concentrated banking markets and when monetary policy is more transparent.

Keywords: Monetary policy; Bank risk-taking; Emerging economies (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015-11-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Monetary policy and bank risk-taking: Evidence from emerging economies (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2015_003

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