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What Does Peer-To-Peer Lending Evidence Say about the Risk-Taking Channel of Monetary Policy?

Yiping Huang, Xiang Li and Chu Wang

No 7792, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper uses loan application-level data from a peer-to-peer lending platform to study the risk-taking channel of monetary policy. By employing a direct ex-ante measure of risk-taking and estimating the simultaneous equations of loan approval and loan amount, we are the first to provide quantitative evidence of the impact of monetary policy on the risk-taking of nonbank financial institution. We find that the search-for-yield is the main workhorse of the risk-taking effect, while we do not observe consistent findings of risk-shifting from the liquidity change. Monetary policy easing is associated with a higher probability of granting loans to risky borrowers and a greater riskiness of credit allocation, but these changes do not necessarily relate to a larger loan amount on average.

Keywords: monetary policy; risk-taking; nonbank financial institution; peer-to-peer lending; search-for-yield; risk-shifting (search for similar items in EconPapers)
JEL-codes: E52 G23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-mac, nep-mon and nep-pay
Date: 2019
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