Risk-Taking Channel of Monetary Policy

Tobias Adrian, Arturo Estrella and Hyun Song Shin

No 12677, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: One of the most robust stylized facts in macroeconomics is the forecasting power of the term spread for future real activity. We propose a possible causal mechanism for the forecasting power of the term spread, deriving from the balance sheet management of financial intermediaries and the risk-taking channel of monetary policy. Monetary tightening leads to the flattening of the term spread, reducing net interest margin and credit supply. We provide empirical support for the risk-taking channel.

Keywords: Risk; taking; channel; of; monetary; policy (search for similar items in EconPapers)
Date: 2018-02
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
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Citations: View citations in EconPapers (6)

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Journal Article: Risk‐taking channel of monetary policy (2019)
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