Measuring bank risk-taking behaviour - The risk-taking channel of Monetary Policy in Malaysia

Tian Huey Teh and Daniel Chin Shen Li

No 16, IFC Working Papers from Bank for International Settlements

Abstract: Using a proprietary micro-dataset on loan defaults in Malaysia, we introduce a simple fixed effects model to extract a measure of bank lending standards from the observed default rates of loan portfolios. We then use this measure to investigate the risk-taking channel of monetary policy in a panel fixed-effects regression. We find limited evidence of the risk-taking channel of monetary policy in Malaysia. This could in part be a reflection of the effects of a pre-emptive monetary policy stance and the implementation of policies from a broader toolkit in leaning against financial imbalances in Malaysia.

Keywords: bank lending; risk-taking channel; monetary policy (search for similar items in EconPapers)
JEL-codes: E50 E52 G21 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2016-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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