Arbeitspapier
Do low interest rates sow the seeds of financial crises?
A view advanced in the aftermath of the late-2000s financial crisis is that lower than optimal interest rates lead to excessive risk taking by financial intermediaries. We evaluate this view in a quantitative dynamic model where interest rate policy affects risk taking by changing the amount of safe bonds available as collateral for repo transactions. Given properly priced collateral, lower than optimal interest rates reduce risk taking. However, if intermediaries can augment their collateral by issuing assets whose risk is underestimated by rating agencies, lower than optimal interest rates contribute to excessive risk taking and amplify the severity of recessions.
- Sprache
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Englisch
- Erschienen in
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Series: EPRI Working Paper ; No. 2012-1
- Klassifikation
-
Wirtschaft
Financial Markets and the Macroeconomy
Monetary Policy
Financial Institutions and Services: Government Policy and Regulation
General Equilibrium and Disequilibrium: Financial Markets
- Thema
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financial intermediation
risk taking
optimal interest rate policy
capital regulation
Geldpolitik
Zinspolitik
Bankgeschäft
Risikofreude
Finanzmarktkrise
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Cociuba, Simona E.
Shukayev, Malik
Ueberfeldt, Alexander
- Ereignis
-
Veröffentlichung
- (wer)
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The University of Western Ontario, Economic Policy Research Institute (EPRI)
- (wo)
-
London (Ontario)
- (wann)
-
2012
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Cociuba, Simona E.
- Shukayev, Malik
- Ueberfeldt, Alexander
- The University of Western Ontario, Economic Policy Research Institute (EPRI)
Entstanden
- 2012