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Capital flows and the risk-taking channel of monetary policy

Valentina Bruno and Hyun Song Shin

Journal of Monetary Economics, 2015, vol. 71, issue C, 119-132

Abstract: Adjustments in bank leverage act as the linchpin in the monetary transmission mechanism that works through fluctuations in risk-taking. In the international context, we find evidence of monetary policy spillovers on cross-border bank capital flows and the US dollar exchange rate through the banking sector. A contractionary shock to US monetary policy leads to a decrease in cross-border banking capital flows and a decline in the leverage of international banks. Such a decrease in bank capital flows is associated with an appreciation of the US dollar.

Keywords: Bank leverage; Monetary policy; Capital flows; Risk-taking channel (search for similar items in EconPapers)
Date: 2015
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Working Paper: Capital Flows and the Risk-Taking Channel of Monetary Policy (2013) Downloads
Working Paper: Capital Flows and the Risk-Taking Channel of Monetary Policy (2012) Downloads
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DOI: 10.1016/j.jmoneco.2014.11.011

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