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Monetary policy and long-run systemic risk-taking

Author

Listed:
  • Gilbert Colletaz

    (UO - Université d'Orléans, LEO - Laboratoire d'Économie d'Orleans [FRE2014] - UO - Université d'Orléans - UT - Université de Tours - CNRS - Centre National de la Recherche Scientifique)

  • Grégory Levieuge

    (UO - Université d'Orléans, LEO - Laboratoire d'Économie d'Orleans [FRE2014] - UO - Université d'Orléans - UT - Université de Tours - CNRS - Centre National de la Recherche Scientifique)

  • Alexandra Popescu

    (CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière [EA 2249] - UP - Université de Poitiers = University of Poitiers, Axe 2 (2017-2021) : "Vulnérabilités et risques" (MSHS Poitiers) - MSHS de Poitiers [Maison des sciences de l'homme et de la société de Poitiers] - Maison des sciences humaines et sociales de Poitiers [USR 3565] - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique, UFR Sciences économiques [Poitiers] - Université de Poitiers – Faculté de Sciences économiques - UP - Université de Poitiers = University of Poitiers)

Abstract

As an extension to the literature on the risk-taking channel of monetary policy, this paper studies the existence of a systemic risk-taking channel (SRTC) in the Eurozone, through an original macroeconomic perspective based on causality measures. Because the SRTC is effective after an "incubation period", we make a distinction between short and long-term causality, following the methodology proposed by Dufour and Taamouti (2010). We find that causality from monetary policy to systemic risk, while not significant in the very short term, robustly represents 75 to 100% of the total dependence between the two variables in the long run. Reverse causality is rejected: systemic risk did not influence the policy of the European Central Bank before the global financial crisis. However, central banks must be aware that a too loose monetary policy stance may be conducive to a build-up of systemic risk.

Suggested Citation

  • Gilbert Colletaz & Grégory Levieuge & Alexandra Popescu, 2018. "Monetary policy and long-run systemic risk-taking," Post-Print hal-02162296, HAL.
    • Handle: RePEc:hal:journl:hal-02162296
    DOI: 10.1016/j.jedc.2017.11.001
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    JEL classification:

    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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