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Risk-Taking Channel of Unconventional Monetary Policies in Bank Lending

Kiyotaka Nakashima, Masahiko Shibamoto and Koji Takahashi
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Kiyotaka Nakashima: Faculty of Economics, Konan University, Japan
Koji Takahashi: Department of Economics, University of California, San Diego, USA

No DP2017-24, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We investigate the effects of unconventional monetary policy on bank lending, using a bank-firm matched dataset in Japan from 1999 to 2015 by disentangling conventional and unconventional monetary policy shocks employed by the Bank of Japan over the past 15 years. We find that a rise in the share of the unconventional assets held by the Bank of Japan boosts lending to firms with a lower distance-to-default ratio from banks with a lower liquid assets ratio and higher risk appetite. In contrast to the composition shock, the monetary base shock of increasing the Bank of Japan’s balance sheet size does not have heterogeneous effects on bank lending. Furthermore, we find that interest rate cuts stimulate lending to risky firms from banks with a higher leverage ratio.

Keywords: Unconventional monetary policy; Quantitative and qualitative monetary easing; Matched lender-borrower data; Risk-taking channel; News shock (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
Date: 2017-09
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