Advanced Search
MyIDEAS: Login

Monetary Policy and Risk Taking

Contents:

Author Info

  • Ignazio Angeloni

Abstract

In this paper Bruegel Visiting Scholar Ignazio Angeloni (European Central Bank), Ester Faia (Goethe University Frankfurt, Kiel IfW and CEPREMAP) and Marco Lo Duca (European Central Bank) examine the links between monetary policy, financial risk and the business cycle, combining data evidence and a new DSGE model with banks. The model includes banks (modeled as in Diamond and Rajan, JF 2000 and JPE 2001) and a financial accelerator (Bernanke et al., 1999 Handbook). A monetary expansion increases the propensity of banks to assume risks. In turn, financial risks affect economic activity and prices. This "risk-taking" channel of monetary transmission, absent in pure financial accelerator models, operates via the leverage decisions of banks. The model results match certain features of the data, as emerged in recent panel data studies and in our own time series estimates for the US and the euro area.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bruegel.org/download/parent/380-monetary-policy-and-risk-taking/file/859-monetary-policy-and-risk-taking-english/
Download Restriction: no

Bibliographic Info

Paper provided by Bruegel in its series Working Papers with number 380.

as in new window
Length:
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:bre:wpaper:380

Contact details of provider:
Postal: Rue de la Charité, B-1210 Brussels
Phone: +32 2 227 4210
Email:
Web page: http://www.bruegel.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Shin, Hyun Song & Adrian, Tobias, 2008. "Financial intermediaries, financial stability and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 287-334.
  2. Glenn D. Rudebusch, 2001. "Term structure evidence on interest rate smoothing and monetary policy inertia," Working Paper Series 2001-02, Federal Reserve Bank of San Francisco.
  3. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  4. Faia, Ester, 2008. "Optimal monetary policy rules with labor market frictions," Journal of Economic Dynamics and Control, Elsevier, vol. 32(5), pages 1600-1621, May.
  5. Raghuram G. Rajan, 2005. "Has Financial Development Made the World Riskier?," NBER Working Papers 11728, National Bureau of Economic Research, Inc.
  6. Fostel, Ana & Geanakoplos, John, 2012. "Why does bad news increase volatility and decrease leverage?," Journal of Economic Theory, Elsevier, vol. 147(2), pages 501-525.
  7. James, Christopher, 1991. " The Losses Realized in Bank Failures," Journal of Finance, American Finance Association, vol. 46(4), pages 1223-42, September.
  8. Douglas W. Diamond & Raghuram G. Rajan, 2001. "Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 287-327, April.
  9. Faia, Ester & Monacelli, Tommaso, 2007. "Optimal interest rate rules, asset prices, and credit frictions," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3228-3254, October.
  10. Alessi, Lucia & Detken, Carsten, 2009. "'Real time'early warning indicators for costly asset price boom/bust cycles: a role for global liquidity," Working Paper Series 1039, European Central Bank.
  11. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299, September.
  12. Campbell, John Y. & Hentschel, Ludger, 1992. "No news is good news *1: An asymmetric model of changing volatility in stock returns," Journal of Financial Economics, Elsevier, vol. 31(3), pages 281-318, June.
  13. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen Terry, 2013. "Really Uncertain Business Cycles," CEP Discussion Papers dp1195, Centre for Economic Performance, LSE.
  14. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  15. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
  16. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  17. Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jan Marc Berk, 2000. "Consumers' Inflation Expectations and Monetary Policy in Europe," MEB Series (discontinued) 2000-6, Netherlands Central Bank, Monetary and Economic Policy Department.
  2. Mark Mink, 2011. "Procyclical Bank Risk-Taking and the Lender of Last Resort," DNB Working Papers 301, Netherlands Central Bank, Research Department.
  3. Itai Agur & Maria Demertzis, 2013. "Leaning Against the Wind and the Timing of Monetary Policy," IMF Working Papers 13/86, International Monetary Fund.
  4. Frank Smets, 2014. "Financial Stability and Monetary Policy: How Closely Interlinked?," International Journal of Central Banking, International Journal of Central Banking, vol. 10(2), pages 263-300, June.
  5. Petra Gerlach-Kristen, 2007. "Three aspects of the Swiss term structure: an empirical survey," Financial Markets and Portfolio Management, Springer, vol. 21(2), pages 221-240, June.
  6. James D. Hamilton, 2008. "Assessing monetary policy effects using daily federal funds futures contracts," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 377-394.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bre:wpaper:380. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruegel).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.