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The Risk-Taking Channel in the US: A GVAR Approach

Raslan Alzubi (), Mustafa Caglayan () and Kostas Mouratidis ()
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Raslan Alzubi: Department of Economics, University of Sheffield

No 2017009, Working Papers from The University of Sheffield, Department of Economics

Abstract: Employing data from thirty large banks in the US, we examine banks' risk-taking behaviour in response to monetary policy shocks. Our investigation provides support for the presence of a risk-taking channel: banks' nonperforming loans increase in medium to long run following an expansionary monetary policy shock. We also find that banks' capital structure plays an important role in explaining bank's risk-taking appetite. Impulse response analysis shows that shocks emanating from larger banks spillover to the rest of the sector but no such effect is observed for smaller banks. The results are confirmed for banks' Z-score.

Keywords: Risk-taking channel; GVAR; monetary policy shocks; spilloverover effects (search for similar items in EconPapers)
JEL-codes: E44 E52 G01 G19 G29 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-rmg
Date: 2017-03
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http://www.sheffield.ac.uk/economics/research/serps/articles/2017_009 First version, March 2017 (application/pdf)

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