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The risk-taking channel of monetary policy in the USA: Evidence from micro-level data

  • Delis, Manthos D
  • Hasan, Iftekhar
  • Mylonidis, Nikolaos

There is a growing consensus that a prolonged period of low interest rates can exert a negative impact on financial stability through the risk-taking incentives of banks. Using micro-level datasets from the US banking sector, this paper finds evidence of a highly significant negative relationship between monetary policy rates and bank-risk taking. This finding remains robust across various specifications, sub-periods and subsamples, thereby confirming the presence of an active risk-taking channel of monetary policy since the 1990s. The results, therefore, support the new responsibilities of the Fed on macro-prudential supervision to monitor systemic risks.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34084.

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Date of creation: 01 Oct 2011
Date of revision:
Handle: RePEc:pra:mprapa:34084
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  1. Borio, Claudio & Zhu, Haibin, 2012. "Capital regulation, risk-taking and monetary policy: A missing link in the transmission mechanism?," Journal of Financial Stability, Elsevier, vol. 8(4), pages 236-251.
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  8. Bluedorn, John C. & Bowdler, Christopher, 2011. "The open economy consequences of U.S. monetary policy," Journal of International Money and Finance, Elsevier, vol. 30(2), pages 309-336, March.
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