The risk-taking channel in the United States: A GVAR approach

Raslan Alzuabi, Mustafa Caglayan*, Kostas Mouratidis

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)
49 Downloads (Pure)

Abstract

Using a panel of large U.S. banks, we examine banks' risk-taking behaviour in response to monetary policy shocks. Our investigation provides support for the presence of a risk-taking channel: banks' non-performing loans increase in the medium to long-run following an expansionary monetary policy shock. We also find that banks' capital structure plays an important role in explaining bank's risk-taking appetite. Impulse response analysis shows that shocks emanating from larger banks spill over to the rest of the sector but no such effect is observed for smaller banks. These findings are confirmed for banks' Z-score.

Original languageEnglish
Pages (from-to)5826-5849
Number of pages24
JournalInternational Journal of Finance and Economics
Volume26
Issue number4
Early online date22 Jul 2020
DOIs
Publication statusPublished - Oct 2021

Keywords

  • impulse response analysis
  • risk-taking channel: GVAR: Monetary policy shocks
  • spillover effects

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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