The risk-taking channel of monetary policy in Norway

Artashes Karapetyan

No 2016/5, Working Paper from Norges Bank

Abstract: We identify the effects of monetary policy on credit risk-taking using a unique dataset covering the population of corporate borrowers in Norway. We find that a lower benchmark interest rate (interbank rates or overnight rates) induces the average bank to grant more loans to risky firms. We also find that the strength of the bank's balance-sheet is important: less capitalized banks are more likely to increase loan volumes to ex-ante risky firms compared to more capitalized ones (Jimenez et al., 2014). The data allow us to distinguish the changes in the supply of credit from the changes in credit demand. In all our specifications we control for both observed and unobserved firm and bank heterogeneity by using financial statement information and firm, bank and time fixed effects.

Keywords: Risk-taking channel; monetary policy; nancial stability; credit risk (search for similar items in EconPapers)
JEL-codes: E44 E5 G01 G21 G28 L14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-02-15
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2016_05

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