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Bank Leverage and Monetary Policy's Risk-Taking Channel: Evidence from the United States

Giovanni DellAriccia, Luc Laeven () and Gustavo Suarez
Authors registered in the RePEc Author Service: Giovanni Dell'ariccia ()

No 11230, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on banks' internal ratings on loans to businesses over the period 1997 to 2011 from the Federal Reserve's survey of terms of business lending. We find that ex-ante risk taking by banks (measured by the risk rating of new loans) is negatively associated with increases in short-term interest rates. This relationship is more pronounced in regions that are less in sync with the nationwide business cycle, and less pronounced for banks with relatively low capital or during periods of financial distress.

Keywords: banks; interest rates; leverage; Monetary policy; risk (search for similar items in EconPapers)
JEL-codes: E43 E52 G21 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-ban, nep-ifn, nep-mac and nep-mon
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Related works:
Journal Article: Bank Leverage and Monetary Policy's Risk-Taking Channel: Evidence from the United States (2017) Downloads
Working Paper: Bank leverage and monetary policy's risk-taking channel: evidence from the United States (2016) Downloads
Working Paper: Bank Leverage and Monetary Policy's Risk-Taking Channel; Evidence from the United States (2013) Downloads
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