Monetary policy and bank risk-taking: Evidence from emerging economies |
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| Institution: | 1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;2. Research Institute of Economics and Management, Collaborative Innovation Center of Financial Security, Southwestern University of Finance and Economics, Chengdu, China;3. School of Economics, LeBow College of Business, Drexel University, Philadelphia, PA, USA;1. International University, Vietnam National University, Ho Chi Minh City, Vietnam;2. Glasgow School of Business & Society, Glasgow Caledonian University, UK;1. Department of Business Administration, Athens University of Economics and Business, 76 Patission Street, GR-10434 Athens, Greece;2. IPAG Lab, IPAG Business School, 184 Boulevard Saint-Germain, FR-75006 Paris, France;3. Department of Banking and Financial Management, University of Piraeus, 80 Karaoli and Dimitriou, GR-18534 Piraeus, Greece;1. Fluminense Federal University, Department of Economics and Central Bank of Brazil, Faculdade de Economia, Sala 434, Campus do Gragoatá, Bloco F, São Domingos, Niterói, RJ CEP: 24210-350, Brazil;2. Fluminense Federal University, Department of Economics, National Council for Scientific and Technological Development (CNPq), Faculdade de Economia, Sala 434, Campus do Gragoatá, Bloco F, São Domingos, Niterói, RJ CEP: 24210-350, Brazil;3. Central Bank of Brazil, Brazil;1. Research Institute of Economics and Management, Collaborative Innovation Center of Financial Security, Southwestern University of Finance and Economics, Chengdu, China;2. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;3. School of Economics, LeBow College of Business, Drexel University, Philadelphia, PA, USA |
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| Abstract: | This paper addresses the impact of monetary policy on banks' risk-taking by using bank-level panel data from more than 1000 banks in 29 emerging economies during 2000–2012. We find that, consistent with the proposition of the “bank risk-taking channel” of monetary policy transmission, banks' riskiness increases when monetary policy is eased. This result is robust when we adopt alternative measures of monetary policy and bank risk, and use different econometric methodologies. In addition, we find that bank risk-taking amid expansionary monetary policy is less conspicuous in a more consolidated banking sector and when monetary policy is more transparent. |
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