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What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy?

Yiping Huang, Xiang Li and Chu Wang

No 14/2019, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper uses loan application-level data from a Chinese peer-to-peer lending platform to study the risk-taking channel of monetary policy. By employing a direct ex-ante measure of risk-taking and estimating the simultaneous equations of loan approval and loan amount, we are the first to provide quantitative evidence of the impact of monetary policy on the risk-taking of nonbank financial institution. We find that the search-for-yield is the main workhorse of the risk-taking effect, while we do not observe consistent findings of risk-shifting from the liquidity change. Monetary policy easing is associated with a higher probability of granting loans to risky borrowers and a greater riskiness of credit allocation, but these changes do not necessarily relate to a larger loan amount on average.

Keywords: monetary policy; risk-taking; non-bank financial institution; search-for-yield; risk-shifting (search for similar items in EconPapers)
JEL-codes: E52 G23 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon, nep-pay and nep-tra
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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https://www.econstor.eu/bitstream/10419/199090/1/1667840886.pdf (application/pdf)

Related works:
Journal Article: What does peer-to-peer lending evidence say about the Risk-Taking Channel of monetary policy? (2021) Downloads
Working Paper: What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy? (2019) Downloads
Working Paper: What Does Peer-To-Peer Lending Evidence Say about the Risk-Taking Channel of Monetary Policy? (2019) Downloads
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