The Risk-taking Channel in Colombia Revisited
AbstractLevels of interest rates below historical norms may have enhanced financial instability in both developed and in developing economies during the 2000´s. The risk-taking channel of monetary transmission policy is a recent theory that explains theinteraction between risk perceptions of the financial system and monetary policy. This paper presents empirical evidence of the risk-taking channel of monetary policy using detailed information on consumer and commercial loans from the Colombianbanking system. Using probit and duration models, we find that the banking system takes on more risk when the level of interest rates are too low. We also find that the response to interest rates is higher in the case of commercial loans.
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Bibliographic InfoArticle provided by BANCO DE LA REPÚBLICA - ESPE in its journal ENSAYOS SOBRE POLÍTICA ECONÓMICA.
Volume (Year): (2012)
Issue (Month): ()
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Monetary policy; lending standards; risk taking; duration analysis; probit models;
Other versions of this item:
- Martha López & Fernando Tenjo & Héctor Zárate, 2012. "The Risk-Taking Channel in Colombia Revisited," BORRADORES DE ECONOMIA 009313, BANCO DE LA REPÚBLICA.
- Martha López & Fernando Tenjo & Héctor Zárate, 2012. "The Risk-Taking Channel in Colombia Revisited," Borradores de Economia 690, Banco de la Republica de Colombia.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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