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The Risk-taking Channel in Colombia Revisited

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Listed:
  • Martha López

    ()

  • Fernando Tenjo

    ()

  • Héctor Zárate

    ()

Abstract

Levels of interest rates below historical norms may have enhanced financial instability in both developed and in developing economies during the 2000´s. The risk-taking channel of monetary transmission policy is a recent theory that explains theinteraction between risk perceptions of the financial system and monetary policy. This paper presents empirical evidence of the risk-taking channel of monetary policy using detailed information on consumer and commercial loans from the Colombianbanking system. Using probit and duration models, we find that the banking system takes on more risk when the level of interest rates are too low. We also find that the response to interest rates is higher in the case of commercial loans.

Suggested Citation

  • Martha López & Fernando Tenjo & Héctor Zárate, 2012. "The Risk-taking Channel in Colombia Revisited," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 30(68), pages 276-295, June.
  • Handle: RePEc:col:000107:010344
    as

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    References listed on IDEAS

    as
    1. Eliana González & Luis F. Melo & Luis E. Rojas & Brayan Rojas, 2011. "Estimations of the Natural Rate of Interest in Colombia," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(1), pages 33-75, January-J.
    2. Martha López & Fernando Tenjo & Héctor Zárate, 2011. "The Risk-Taking Channel and Monetary Transmission Mechanism in Colombia," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 29(64), pages 211-234, July.
    3. Gabriel Jiménez & Steven Ongena & José‐Luis Peydró & Jesús Saurina, 2014. "Hazardous Times for Monetary Policy: What Do Twenty‐Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk‐Taking?," Econometrica, Econometric Society, vol. 82(2), pages 463-505, March.
    4. Douglas W. Diamond & Raghuram G. Rajan, 2006. "Money in a Theory of Banking," American Economic Review, American Economic Association, vol. 96(1), pages 30-53, March.
    5. Leonardo Gambacorta, 2009. "Monetary policy and the risk-taking channel," BIS Quarterly Review, Bank for International Settlements, December.
    6. Piti Disyatat, 2011. "The Bank Lending Channel Revisited," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 711-734, June.
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    Citations

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    Cited by:

    1. repec:bdr:bdrcap:2013-09-645-674 is not listed on IDEAS
    2. repec:bdr:bdrcap:2013-09-261-299 is not listed on IDEAS
    3. repec:oup:revfin:v:22:y:2018:i:4:p:1335-1373. is not listed on IDEAS
    4. Gabriel Jiménez & Steven Ongena & José‐Luis Peydró & Jesús Saurina, 2014. "Hazardous Times for Monetary Policy: What Do Twenty‐Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk‐Taking?," Econometrica, Econometric Society, vol. 82(2), pages 463-505, March.
    5. Steven Ongena & Günseli Tümer–Alkan & Natalja von Westernhagen, 2018. "Do Exposures to Sagging Real Estate, Subprime, or Conduits Abroad Lead to Contraction and Flight to Quality in Bank Lending at Home?," Review of Finance, European Finance Association, vol. 22(4), pages 1335-1373.
    6. repec:col:000094:010860 is not listed on IDEAS
    7. repec:bdr:bdrlib:2013-09 is not listed on IDEAS
    8. Huang, Yiping & Li, Xiang & Wang, Chu, 2019. "What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy?," BOFIT Discussion Papers 16/2019, Bank of Finland, Institute for Economies in Transition.
    9. Ruth Reyes Nidia & José Eduardo Gómez G. & Jair Ojeda Joya, 2013. "Bank Lending, Risk Taking, and the Transmission of Monetary Policy: New Evidence for Colombia," Borradores de Economia 772, Banco de la Republica de Colombia.
    10. Martha López & Fernando Tenjo & Hector Zárate, 2014. "Credit Cycles, Credit Risk and Countercyclical Loan Provisions," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 32(74), pages 9-17, June.
    11. Fernando Tenjo Galarza & Enrique López Enciso & Héctor Zárate Solano, 2015. "Riesgo de crédito y la transmisión de la política monetaria en Colombia," BORRADORES DE ECONOMIA 012616, BANCO DE LA REPÚBLICA.
    12. Huang, Yiping & Li, Xiang & Wang, Chu, 2019. "What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy?," IWH Discussion Papers 14/2019, Halle Institute for Economic Research (IWH).
    13. Martha López, 2017. "Economic Sectors and the Risk-taking Channel of Monetary Policy," Borradores de Economia 1029, Banco de la Republica de Colombia.
    14. Yiping Huang & Xiang Li & Chu Wang, 2019. "What Does Peer-To-Peer Lending Evidence Say about the Risk-Taking Channel of Monetary Policy?," CESifo Working Paper Series 7792, CESifo Group Munich.

    More about this item

    Keywords

    Monetary policy; lending standards; risk taking; duration analysis; probit models;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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