Arbeitspapier
The Risk-Taking Channel of Monetary Policy Transmission in the Euro Area
In this paper, we provide evidence for a risk-taking channel of monetary policy transmission in the euro area that works through the relaxation of lending standards for borrowers. Our dataset covers the period 2003Q1-2016Q2 and includes, in addition to the standard variables for real GDP growth, inflation, and the monetary policy stance, indicators of bank lending standards and bank lending margins. Based on vector autoregressive models with (i) recursive identification and (ii) sign restrictions, we show that banks react aggressively to an expansionary monetary policy shock by lowering their lending standards. The banks’ efforts to keep their lending margin stable, however, are not successful as we detect a significant compression. We document these findings for the euro area as a whole and for its individual member states. In particular, banks in the Netherlands, Portugal, Spain, and Ireland lowered their lending standards after expansionary monetary policy shocks. The compression of the lending margin is most pronounced in the five crisis countries (Greece, Ireland, Italy, Portugal, and Spain).
- Language
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Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 6982
- Classification
-
Wirtschaft
Financial Markets and the Macroeconomy
Money Supply; Credit; Money Multipliers
Monetary Policy
Central Banks and Their Policies
Financial Institutions and Services: Government Policy and Regulation
- Subject
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European Central Bank
macroprudential policy
monetary policy transmission
risk-taking channel
vector autoregression
- Event
-
Geistige Schöpfung
- (who)
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Neuenkirch, Matthias
Nöckel, Matthias
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2018
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Neuenkirch, Matthias
- Nöckel, Matthias
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2018
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