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Does International Monetary Policy Influence The Bank Risk? Evidence From India

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Listed:
  • Ameen Omar Shareef

    (Indian Institute of Technology Hyderabad, India)

  • K.P. Prabheesh

    (Indian Institute of Technology Hyderabad, India)

Abstract

This study empirically examines the impact of international monetary policy on bank risk in the Indian context. Using annual data from 64 banks and employing panel OLS and GMM techniques, this study finds that: (1) a contractionary international monetary policy increases bank risk; (2) an appreciation of the domestic exchange rate induces bank riskiness; (3) the domestic monetary policy affects bank risk through the “search for yield†channel; and (4) the international monetary policy is relatively significant in explaining the bank riskiness in the post-global financial crisis period.

Suggested Citation

  • Ameen Omar Shareef & K.P. Prabheesh, 2022. "Does International Monetary Policy Influence The Bank Risk? Evidence From India," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(2), pages 135-154, August.
    • Handle: RePEc:idn:journl:v:25:y:2022:i:2a:p:135-154
    DOI: https://doi.org/10.21098/bemp.v25i2.1867
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    More about this item

    Keywords

    International monetary policy; Banks risk-taking; Z-score; GMM;
    All these keywords.

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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