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 language | English |
---|---|
Pages (from-to) | 5826-5849 |
Number of pages | 24 |
Journal | International Journal of Finance and Economics |
Volume | 26 |
Issue number | 4 |
Early online date | 22 Jul 2020 |
DOIs | |
Publication status | Published - Oct 2021 |
Keywords
- impulse response analysis
- risk-taking channel: GVAR: Monetary policy shocks
- spillover effects
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics