The Risk-Taking Channel of Monetary Policy in the Us: Evidence from Corporate Loan Data
41 Pages Posted: 14 Aug 2017 Last revised: 18 Nov 2021
Date Written: August 7, 2017
Abstract
To study the presence of a risk-taking channel in the US, we build a comprehensive dataset from the syndicated corporate loan market and measure monetary policy using different measures, most notably Taylor (1993) and Romer and Romer (2004) residuals. We identify a negative relation between monetary policy rates and bank risk-taking, especially in the run up to the 2007 financial crisis. However, this effect is purely supply-side driven only when using Taylor residuals and an ex ante measure of bank risk-taking. Our results highlight the sensitivity of the potency of the risk-taking channel to the measures of monetary policy innovations.
Keywords: bank risk, monetary policy, US commercial banks, total loans, new loans
JEL Classification: G21, G01, E43, E52
Suggested Citation: Suggested Citation