Capital Flows and the Risk-Taking Channel of Monetary Policy

Valentina Bruno and Hyun Song Shin

No 18942, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the dynamics linking monetary policy with bank leverage and show that adjustments in leverage act as the linchpin in the monetary transmission mechanism that works through fluctuations in risk-taking. Motivated by the evidence, we formulate a model of the "risk-taking channel" of monetary policy in the international context that rests on the feedback loop between increased leverage of global banks and capital flows amid currency appreciation for capital recipient economies.

JEL-codes: E5 F32 F33 F34 G21 (search for similar items in EconPapers)
Date: 2013-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn, nep-mac, nep-mon and nep-opm
Note: IFM ME
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Citations: View citations in EconPapers (69)

Published as Bruno, Valentina & Shin, Hyun Song, 2015. "Capital flows and the risk-taking channel of monetary policy," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 119-132.

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Related works:
Journal Article: Capital flows and the risk-taking channel of monetary policy (2015)
Working Paper: Capital Flows and the Risk-Taking Channel of Monetary Policy (2012)
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