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The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

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  • Delis, Manthos D
  • Hasan, Iftekhar
  • Mylonidis, Nikolaos

Abstract

There is a growing consensus that a prolonged period of low interest rates can exert a negative impact on financial stability through the risk-taking incentives of banks. Using micro-level datasets from the US banking sector, this paper finds evidence of a highly significant negative relationship between monetary policy rates and bank-risk taking. This finding remains robust across various specifications, sub-periods and subsamples, thereby confirming the presence of an active risk-taking channel of monetary policy since the 1990s. The results, therefore, support the new responsibilities of the Fed on macro-prudential supervision to monitor systemic risks.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34084.

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Date of creation: 01 Oct 2011
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Handle: RePEc:pra:mprapa:34084

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Keywords: Bank risk; monetary policy; US commercial banks; Total loans; New loans;

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  1. Adrian, Tobias & Song Shin, Hyun, 2010. "Financial Intermediaries and Monetary Economics," Handbook of Monetary Economics, Elsevier, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 12, pages 601-650 Elsevier.
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Citations

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Cited by:
  1. Agur, Itai, 2013. "Multiple bank regulators and risk taking," Journal of Financial Stability, Elsevier, vol. 9(3), pages 259-268.
  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.
  3. Delis, Manthos & Karavias, Yiannis, 2013. "Optimal versus realized bank credit risk and monetary policy," MPRA Paper 49795, University Library of Munich, Germany.
  4. Agur, Itai & Demertzis, Maria, 2012. "Excessive bank risk taking and monetary policy," Working Paper Series 1457, European Central Bank.
  5. Delis, Manthos D & Kouretas, Georgios & Tsoumas, Chris, 2011. "Anxious periods and bank lending," MPRA Paper 32422, University Library of Munich, Germany.
  6. Itai Agur & Maria Demertzis, 2013. "Leaning Against the Wind and the Timing of Monetary Policy," IMF Working Papers 13/86, International Monetary Fund.
  7. Brissimis, Sophocles & Delis, Mannthos & Iosifidi, Maria, 2012. "Bank market power and monetary policy transmission," MPRA Paper 49206, University Library of Munich, Germany.

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