Low Interest Rates and Bank Risk-Taking: Has the Crisis Changed Anything? Evidence from the Eurozone
Clicks: 288
ID: 18625
2015
This paper examines the impact of monetary policy on bank risk-taking and the influence of the recent financial crisis on this relation. We use a dataset of 571 commercial banks from Eurozone and analyze the relation on the period from 1999 to 2011, with emphasize on the period 2008 to 2011. We use non-performing loans, loan loss provisions and Z-score as measures for bank risk-taking, while for monetary policy the proxies are short-term interest rates (computed using a Taylor rule) and long-term interest rates. We determine the relation between the two by taking into account some specific control variables and analyze it using an entity fixed-effects model and Generalized Method of Moments, alternatively. Empirical results point to a negative relation between interest rates and bank risk-taking. In addition to this, results show that the crisis has led to an additional negative impact on the relation between interest rates and bank risk-taking for the turmoil period 2008-2011.
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marius2015lowreview
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Authors | Marius, Andries Alin;Vasile, Cocriş;Ioana, Pleşcău; |
Journal | review of economic and business studies |
Year | 2015 |
DOI | DOI not found |
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Keywords | Keywords not found |
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