Banks’ market capital and the international risk taking channel of US monetary policy

Stefan Avdjiev and Jose Maria Serena

Journal of International Economics, 2025, vol. 157, issue C

Abstract: We demonstrate that banks’ market capital is a key determinant of the strength of the international risk-taking channel of US monetary policy. The impact of US monetary policy on international risk-taking is greater for banks with low market capital. The effect of market capital exists in addition to the previously documented effect of regulatory capital, which works in the opposite direction. As a result, the international risk-taking channel of monetary policy is most powerful for banks that have a combination of high regulatory capital and low market capital.

Keywords: Bank capital; International risk taking channel; US monetary policy; International leveraged loans (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:157:y:2025:i:c:s0022199625000558

DOI: 10.1016/j.jinteco.2025.104099

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