Monetary policy, economic uncertainty and bank risk: Cross-country evidence

Ji Wu, Yuanyun Yan, Minghua Chen and Bang Jeon

Journal of International Money and Finance, 2022, vol. 122, issue C

Abstract: This paper investigates how economic uncertainty affects the monetary policy–bank risk nexus. Using panel data on approximately 1100 public banks in 43 economies during the period of 2000–2018, we find consistent evidence that the “risk-taking channel” of monetary policy is weakened amid higher economic uncertainty. This finding is in line with the “option value of waiting” hypothesis, which suggests that economic uncertainty may induce banks to withhold their adjustments of risk-taking strategies when monetary policy is altered.

Keywords: Monetary policy; Economic uncertainty; Bank risk (search for similar items in EconPapers)
JEL-codes: E52 G15 G21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:122:y:2022:i:c:s026156062100231x

DOI: 10.1016/j.jimonfin.2021.102580

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