Monetary policy and risk taking

• Published in: Journal of economic dynamics & control Vol. 52; pp. 285 - 307
• Main Authors: Angeloni, Ignazio, Faia, Ester, Lo Duca, Marco
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.03.2015; Elsevier Sequoia S.A
• Subjects: Asset pricing; Bank runs; Banks; Economic theory; Equilibrium; Macroeconomics; Monetary policy; Output; Risk assessment; Risk management; Risk taking; Studies; Vector-autoregressive models; Volatility; E5; Monetary policy; G01; Risk taking; E4; Bank runs
• ISSN: 0165-1889; 1879-1743
• DOI: 10.1016/j.jedc.2014.12.001

We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel – monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel exists and is particularly significant on the bank funding side. Then, to ration...