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Can Low Interest Rates be Harmful: An Assessment of the Bank Risk-Taking Channel in Asia

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Events surrounding the global financial crisis have brought to light the potential role of monetary policy in precipitating the crisis. Numerous studies on advanced economies have documented a significant negative relationship between interest rates and bank risk-taking. This paper also finds the presence of the risk-taking channel based on a panel of publicly listed bank data in Asia. Using both annual and quarterly data, "too low" interest rates are found to lead to an increase in bank risk-taking.

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File URL: http://aric.adb.org/pdf/workingpaper/WP123_Tang_Assessment_Bank_Risk_Taking.pdf
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Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 123.

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Length: 52 pages
Date of creation: 01 Jan 2014
Handle: RePEc:ris:adbrei:0123
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