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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. Raghuram G. Rajan, 2005. "Has Financial Development Made the World Riskier?," NBER Working Papers 11728, National Bureau of Economic Research, Inc.
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Cited by:
  1. Brissimis, Sophocles & Delis, Mannthos & Iosifidi, Maria, 2012. "Bank market power and monetary policy transmission," MPRA Paper 49206, University Library of Munich, Germany.
  2. Agur, Itai, 2013. "Multiple bank regulators and risk taking," Journal of Financial Stability, Elsevier, Elsevier, vol. 9(3), pages 259-268.
  3. Agur, Itai & Demertzis, Maria, 2013. "“Leaning against the wind” and the timing of monetary policy," Journal of International Money and Finance, Elsevier, Elsevier, vol. 35(C), pages 179-194.
  4. Ekin Ayse Ozsuca & Elif Akbostanci, 2012. "An Empirical Analysis of the Risk Taking Channel of Monetary Policy in Turkey," ERC Working Papers, ERC - Economic Research Center, Middle East Technical University 1208, ERC - Economic Research Center, Middle East Technical University, revised Dec 2012.
  5. Delis, Manthos & Karavias, Yiannis, 2013. "Optimal versus realized bank credit risk and monetary policy," MPRA Paper 49795, University Library of Munich, Germany.
  6. Delis, Manthos D & Kouretas, Georgios & Tsoumas, Chris, 2011. "Anxious periods and bank lending," MPRA Paper 32422, University Library of Munich, Germany.
  7. Agur, Itai & Demertzis, Maria, 2012. "Excessive bank risk taking and monetary policy," Working Paper Series, European Central Bank 1457, European Central Bank.

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