The Risk-Taking Channel of Monetary Policy: Do Macroprudential Regulation and Central Bank Independence Influence the Transmission of Interest Rates?

Alin-Marius Andrieş () and Ioana Pleşcău ()
Additional contact information
Alin-Marius Andrieş: Research Center in Finance, Alexandru Ioan Cuza University of Iasi,
Ioana Pleşcău: Research Center in Finance, Alexandru Ioan Cuza University of Iasi,
Authors registered in the RePEc Author Service: Alin Marius Andrieș

Journal for Economic Forecasting, 2020, issue 3, 5-30

Abstract: This study focuses on the risk-taking channel of monetary policy and its interaction with a supervisory-independence channel for commercial banks from Central and Eastern Europe, during the 2005-2011 period. Our results support the existence of an inverse relationship between expansionary monetary policy and bank risk-taking, meaning that very low interest rates lead to higher bank risk-taking. Also, our results show that the tight macroprudential regulation framework mitigates the negative impact of low rates. Furthermore, we show that central bank independence exerts the same beneficial effect on the bank risk-taking channel because results show a dampening effect of central bank independence on the relation between expansionary monetary policy and bank risk-taking. Moreover, our results demonstrate that the risk-taking channel of monetary policy is even stronger in times of financial crisis.

Keywords: monetary policy; macroprudential regulation; financial crisis; bank risk; central bank independence (search for similar items in EconPapers)
JEL-codes: E60 G01 G21 G28 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.ipe.ro/rjef/rjef3_20/rjef3_2020p5-30.pdf

Related works:
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:rjr:romjef:v::y:2020:i:3:p:5-30

Access Statistics for this article

Journal for Economic Forecasting is currently edited by Lucian Liviu Albu and Corina Saman

More articles in Journal for Economic Forecasting from Institute for Economic Forecasting Contact information at EDIRC.
Bibliographic data for series maintained by Corina Saman ( this e-mail address is bad, please contact ).