Monetary Policy, Risk-Taking, and Pricing: Evidence from a Quasi-Natural Experiment

Vasso Ioannidou (), Steven Ongena and Jose-Luis Peydro

Review of Finance, 2015, vol. 19, issue 1, 95-144

Abstract: We study the risk-taking channel of monetary policy in Bolivia, a dollarized country where monetary changes are transmitted exogenously from the USA. We find that a lower policy rate spurs the granting of riskier loans, to borrowers with worse credit histories, lower ex-ante internal ratings, and weaker ex-post performance (acutely so when the rate subsequently increases). Effects are stronger for small firms borrowing from multiple banks. To uniquely identify risk-taking, we assess collateral coverage, expected returns, and risk premia of the newly granted riskier loans, finding that their returns and premia are actually lower, especially at banks suffering from agency problems.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (191)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfu035 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Journal Article: Monetary Policy, Risk-Taking and Pricing: Evidence from a Quasi-Natural Experiment (2015)
Working Paper: Monetary Policy, Risk-Taking, and Pricing: Evidence from a Quasi-Natural Experiment (2009)
Working Paper: Monetary Policy, Risk-Taking, and Pricing: Evidence from a Quasi-Natural Experiment (2009)
Working Paper: Monetary policy, risk-taking and pricing: Evidence from a quasi-natural experiment (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:19:y:2015:i:1:p:95-144.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().