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Low Interest Rates And Bank Risk-Taking: Has The Crisis Changed Anything? Evidence From The Eurozone

Author

Listed:
  • Alin Marius ANDRIES

    () (Alexandru Ioan Cuza University of Iasi, B-dul Carol 1 nr.22, Iasi, 70050, Romania)

  • Vasile COCRIS

    () (Alexandru Ioan Cuza University of Iasi, B-dul Carol 1 nr.22, Iasi, 70050, Romania)

  • Ioana PLESCAU

    () (Alexandru Ioan Cuza University of Iasi, B-dul Carol 1 nr.22, Iasi, 70050, Romania)

Abstract

This paper examines the impact of monetary policy on bank risk-taking and the influence of the recent financial crisis on this relation. We use a dataset of 571 commercial banks from Eurozone and analyze the relation on the period from 1999 to 2011, with emphasize on the period 2008 to 2011. We use non-performing loans, loan loss provisions and Z-score as measures for bank risk-taking, while for monetary policy the proxies are short-term interest rates (computed using a Taylor rule) and long-term interest rates. We determine the relation between the two by taking into account some specific control variables and analyze it using an entity fixed-effects model and Generalized Method of Moments, alternatively. Empirical results point to a negative relation between interest rates and bank risk-taking. In addition to this, results show that the crisis has led to an additional negative impact on the relation between interest rates and bank risk-taking for the turmoil period 2008-2011.

Suggested Citation

  • Alin Marius ANDRIES & Vasile COCRIS & Ioana PLESCAU, 2015. "Low Interest Rates And Bank Risk-Taking: Has The Crisis Changed Anything? Evidence From The Eurozone," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 15, pages 125-148, June.
  • Handle: RePEc:aic:revebs:y:2015:j:15:andriesa
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    References listed on IDEAS

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    Cited by:

    1. repec:mes:emfitr:v:54:y:2018:i:9:p:1946-1962 is not listed on IDEAS
    2. Simona MUTU, 2015. "Exposure To Systemic Risk Of The European Too-Big-To-Fail Banks During Crisis," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 16, pages 103-115, December.

    More about this item

    Keywords

    monetary policy; bank risk-taking; financial crisis; monetary transmission mechanism;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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