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The Risk-Taking Channel and Monetary Transmission Mechanism in Colombia

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  • Martha López

    ()

  • Fernando Tenjo

    ()

  • Héctor Zárate

    ()

Abstract

The recent financial crisis has brought to the forefront the need for a better understanding of the transmission mechanisms of monetary policy. The main step forward on this issue has drawn on work aimed at stressing the role of the financial sector in this transmission. Particular emphasis has been placed on how policy actions impact risk perceptions and attitudes of banks and other financial institutions,leading to shifts in the supply of credit. Along these lines, and based on evidence from Colombia,this paper finds a significant link between low interest rates and banks´ risk-taking based on evidence from Colombia. Lower interest rates raise the probability of default on new loans, but reduce that on outstanding loans. Furthermore, this channel of policy transmission depends on some bank, loan and borrower characteristics, as well as on macroeconomic conditions, such as the growth rate of the economy.

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Bibliographic Info

Article provided by BANCO DE LA REPÚBLICA - ESPE in its journal ENSAYOS SOBRE POLÍTICA ECONÓMICA.

Volume (Year): (2011)
Issue (Month): ()
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Handle: RePEc:col:000107:009446

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Keywords: monetary policy; lending standards; risk-taking; duration analysis; accelerated failure time models.;

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  1. Altunbas, Yener & Gambacorta, Leonardo & Marques-Ibanez, David, 2010. "Bank risk and monetary policy," Journal of Financial Stability, Elsevier, vol. 6(3), pages 121-129, September.
  2. Altunbas, Yener & Gambacorta, Leonardo & Marqués-Ibáñez, David, 2010. "Does monetary policy affect bank risk-taking?," Working Paper Series 1166, European Central Bank.
  3. Ioannidou, V. & Ongena, S. & Peydro, J.L., 2009. "Monetary Policy, Risk-Taking, and Pricing: Evidence from a Quasi-Natural Experiment," Discussion Paper 2009-31 S, Tilburg University, Center for Economic Research.
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Cited by:
  1. Martha López & Fernando Tenjo & Héctor Zárate, 2012. "The Risk-Taking Channel in Colombia Revisited," BORRADORES DE ECONOMIA 009313, BANCO DE LA REPÚBLICA.
  2. Ekin Ayse Ozsuca & Elif Akbostanci, 2012. "An Empirical Analysis of the Risk Taking Channel of Monetary Policy in Turkey," ERC Working Papers 1208, ERC - Economic Research Center, Middle East Technical University, revised Dec 2012.

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