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The interplay between quantitative easing and risk: the case of the Japanese banking

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  • Emmanuel C. Mamatzakis

    () (University of Sussex)

  • Anh N. Vu

    (University of Sussex)

Abstract

The Japanese banking industry is an interesting one, given chronic problems related to notorious non-performing loans, originated back in the 1990s, but also due to an unprecedented monetary expansion. In this paper, we focus on the impact of quantitative easing on bank level risk, while controlling for bank competition. We opt for a measure of bank specific risk-taking based on a new data set of bankrupt and restructured loans. Given issues related to endogeneity among the main variables, we adopt dynamic panel threshold and panel vector autoregression analyses that address such criticism. Results demonstrate that quantitative easing reduces bankrupt and restructured loan ratios, though we do not observe a similar impact on bank stability. Given the adoption of negative rates in January 2016 by the Bank of Japan, our study comes is timely and provides insightful implications for future research.

Suggested Citation

  • Emmanuel C. Mamatzakis & Anh N. Vu, 2017. "The interplay between quantitative easing and risk: the case of the Japanese banking," Working Papers 226, Bank of Greece.
  • Handle: RePEc:bog:wpaper:226
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    Cited by:

    1. Mamatzakis, Emmanuel & matousek, roman & vu, anh, 2019. "The interplay between problem loans and Japanese bank productivity," MPRA Paper 92960, University Library of Munich, Germany.
    2. Mamatzakis, Emmanuel & Bagntasarian, Anna, 2019. "The nexus between underlying dynamics of bank capital buffer and performance," MPRA Paper 92961, University Library of Munich, Germany.

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    More about this item

    Keywords

    Quantitative easing; bank risk-taking; Japan;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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