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Re-Exploring the Nexus between Monetary Policy and Banks' Risk-Taking

Melchisedek Joslem Ngambou Djatche

No 2018-12, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: In this paper, we analyse the link between monetary policy and banks’ risk-taking behaviour. Some theoretical and empirical studies show that monetary easy whet banks’ risk appetite through asset valuation and search for yield process. However, since 2010, the low interest rate environment has cast doubt on these results. Our study deepens the analysis of the monetary risk-taking channel considering non-linearity, especially through threshold effects model. Using a dataset of US banks, we find that the impact of low interest rates on banks risk depend on the regime of the monetary stance, i.e on the deviation of monetary rate from the Taylor rule.

Keywords: Monetary policy; financial stability; bank risk-taking; non-dynamic panel threshold model (search for similar items in EconPapers)
JEL-codes: E44 E58 G21 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2018-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Related works:
Journal Article: Re-exploring the nexus between monetary policy and banks' risk-taking (2019) Downloads
Working Paper: Re-exploring the nexus between monetary policy and banks'risk-taking (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2018-12

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