The interplay between quantitative easing and risk: the case of the Japanese banking
Emmanuel Mamatzakis and
Anh N. Vu
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Anh N. Vu: University of Sussex
No 226, Working Papers from Bank of Greece
The Japanese banking industry is an interesting one, given chronic problems related to notorious non-performing loans, originated back in the 1990s, but also due to an unprecedented monetary expansion. In this paper, we focus on the impact of quantitative easing on bank level risk, while controlling for bank competition. We opt for a measure of bank specific risk-taking based on a new data set of bankrupt and restructured loans. Given issues related to endogeneity among the main variables, we adopt dynamic panel threshold and panel vector autoregression analyses that address such criticism. Results demonstrate that quantitative easing reduces bankrupt and restructured loan ratios, though we do not observe a similar impact on bank stability. Given the adoption of negative rates in January 2016 by the Bank of Japan, our study comes is timely and provides insightful implications for future research.
Keywords: Quantitative easing; bank risk-taking; Japan (search for similar items in EconPapers)
JEL-codes: G21 C23 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
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