IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Does a Low Interest Rate Environment Affect Risk Taking in Austria?

Listed author(s):

It has recently been arg ued that a prolonged period of low interest rates under benign economic conditions tends to produce excessive risk taking in financial markets. The mechanism by which monetary policy affects investors’ risk positions has been called the “risk-taking channel” of monetary policy. We discuss this channel and compare it with the more traditional broad credit channel. Furthermore, we provide new evidence on the existence of this channel, using Austrian firm and bank data taken from the OeNB’s credit register. In particular, we show that the expected default rates within Austrian banks’ business-loan portfolios increased during the period of low refinancing rates from 2003 to 2005. This result is new and important in at least two respects: first, we construct a measure of Austrian banks’ portfolio risk on the basis of a matched lender and borrower dataset. Second, we specifically identify the effect of a monetary policy regime which is characterized by interest rates that are held at a low level for too long, as opposed to the more traditional effect of monetary policy “shocks,” usually identified through quarter-on-quarter changes in short-term interest rates.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2010)
Issue (Month): 4 ()
Pages: 32-48

in new window

Handle: RePEc:onb:oenbmp:y:2010:i:4:b:2
Contact details of provider: Postal:
P.O. Box 61, A-1011 Vienna, Austria

Phone: +43/1/404 20 7405
Fax: +43/1/404 20 7499
Web page:

More information through EDIRC

Order Information: Postal: Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Giovanni Dell'Ariccia, 2010. "Monetary Policy and Bank Risk-Taking," IMF Staff Position Notes 2010/09, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2010:i:4:b:2. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudia Kwapil)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.