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
Englisch

Erschienen in
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
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)
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

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Cociuba, Simona E.
  • Shukayev, Malik
  • Ueberfeldt, Alexander
  • The University of Western Ontario, Economic Policy Research Institute (EPRI)

Entstanden

  • 2012

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