Bank risk-taking and impaired monetarypolicy transmission

Arbeitspapier

We consider a standard banking model with agency frictions to simultaneously studythe weakening and reversal of monetary transmission and banks' risk-taking in alow-interest environment. Both, weaker monetary transmission and higher risk-taking arise because lower policy rates impair banks' net worth. The pass-throughto deposit rates, the level of excess reserves and the extent of the agency problembetween banks and depositors are crucial determinants of monetary transmission.If the deposit pass-through is sufficiently impaired, a reversal rate exists. For policyrates below the reversal rate further interest rate reductions lead to a disproportionalincrease in risk-taking and a contraction in loan supply.

Object Details

• ISBN: 978-3-95729-850-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Deutsche Bundesbank Discussion Paper ; No. 42/2021

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Markets and the Macroeconomy ; Monetary Policy
• Subject: Monetary policy ; Bank lending ; Risk-taking channel ; Reversal rate

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koenig, Philipp J. ; Schliephake, Eva
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/247680
• Last update: 10.03.2025, 11:43 AM CET