Monetary Policy and Risk Taking Behavior of Banks in Pakistan

Safia Shabbir, Faisal Rana and Javed Iqbal

MPRA Paper from University Library of Munich, Germany

Abstract: Using quarterly data on commercial banks operating in Pakistan over a period of 2002-2014, this study finds that banking sector in Pakistan takes more risk during ease and infection ratio increases with a rise in policy rate. In addition, with lower return on asset and small capital base, banks might turn fragile and be vulnerable to solvency risk. Observing the bank characteristics we observe that small size banks with high liquidity and strong capital base are more likely to carry risk during monetary ease.

Keywords: Monetary policy; Transmission mechanisms; Risk-taking channel; Panel data (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Date: 2016-04-07
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https://mpra.ub.uni-muenchen.de/122960/1/MPRA_paper_122960.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:122931

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