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Does central bank communication affect bank risk-taking?

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  • G. C. Montes
  • A. Scarpari

Abstract

This article examines whether bank risk-taking is influenced by monetary policies as well as by communication policies of a central bank. In particular, we analyse whether the signal emitted by the central bank about a likely rise (fall) in the basic interest rate for the next policy meeting and its pessimistic (optimistic) perception regarding the macroeconomic environment are responsible for inducing banks to take less (more) risks. We provide evidence for the link between monetary policies, central bank communication and bank risk-taking. The findings reveal central bank communication influences the behaviour of banks once their risk perceptions are affected.

Suggested Citation

  • G. C. Montes & A. Scarpari, 2015. "Does central bank communication affect bank risk-taking?," Applied Economics Letters, Taylor & Francis Journals, vol. 22(9), pages 751-758, June.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:9:p:751-758
    DOI: 10.1080/13504851.2014.975325
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    Cited by:

    1. G. C. Montes & R. T. F. Nicolay, 2017. "Does clarity of central bank communication affect credibility? Evidences considering governor-specific effects," Applied Economics, Taylor & Francis Journals, vol. 49(32), pages 3163-3180, July.
    2. Rodolfo Tomás da Fonseca Nicolay & Claudio Oliveira de Moraes & Bruno Pires Tiberto, 2018. "The Effect of Central Bank Communication on the Capital Buffer of Banks: Evidence from an Emerging Economy," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 3(1), pages 1-26, September.

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