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Bank’s risk measures and monetary policy: Evidence from a large emerging economy

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  • de Moraes, Claudio Oliveira
  • de Mendonça, Helder Ferreira

Abstract

Based on data collected from Brazilian banks, this study aims to understand how monetary policy affects bank’s risk measures that can be used as macroprudential financial institutions-based policies. The findings denote that an increase in the monetary policy interest rate implies an adjustment in the banks’ strategy for ensuring safety and soundness. On the other hand, when the central bank reduces the interest rate, banks decrease their risk covers (bank’s risk measures), becoming less safe. Hence, this scenario should trigger macroprudential supervisor awareness. In brief, the results suggest that the coordination between macroprudential and monetary policies is necessary.

Suggested Citation

  • de Moraes, Claudio Oliveira & de Mendonça, Helder Ferreira, 2019. "Bank’s risk measures and monetary policy: Evidence from a large emerging economy," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 121-132.
    • Handle: RePEc:eee:ecofin:v:49:y:2019:i:c:p:121-132
    DOI: 10.1016/j.najef.2019.04.002
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    Cited by:

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    5. Ni, Jianhui & Ruan, Jia, 2024. "Contagion effects of external monetary shocks on systemic financial risk in China: Evidence from the Euro area and Japan," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    Bank risk; Monetary policy; Macroprudential policy;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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