The Risk-Taking Channel and Monetary Transmission Mechanism in Colombia

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

Borradores de Economia from Banco de la Republica de Colombia

Abstract: The recent financial crisis has brought to the forefront the need of a better understanding of the transmission mechanisms of monetary policy. The main step forward in this direction has drawn on work aimed at stressing the role of the financial sector in this transmission. Particular emphasis has been place on how policy actions impact risk perceptions and attitudes of banks and other financial institutions, leading to shifts in the supply of credit. Along these lines, and based on evidence from Colombia, the present paper finds a significant link between low interest rates and banks’ risk taking based on evidence from Colombia. Lower interest rates raise the probability of default on new loans but reduce that on outstanding loans. Furthermore, this channel of policy transmission depends on some bank, loan and borrower characteristics, as well on macroeconomic conditions such as the rate of growth of the economy.

Keywords: Monetary policy; lending standards; risk taking; duration analysis; accelerated failure time models. (search for similar items in EconPapers)
JEL-codes: E44 G21 L14 (search for similar items in EconPapers)
Date: 2010-07
References: View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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https://doi.org/10.32468/be.616 (application/pdf)

Related works:
Journal Article: The Risk-Taking Channel and Monetary Transmission Mechanism in Colombia (2011)
Journal Article: The Risk-Taking Channel and Monetary Transmission Mechanism in Colombia (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:616

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