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Zhang, Z., Clovis, J. 
ORCID: 0000-0001-7390-9117, Moffatt, P. and Wang, W.,
2024.
From theory to practice: monetary policy transmission and bank risk dynamics.
PLoS ONE, 19 (4): e0299209.
ISSN 1932-6203
Abstract
This paper investigates the relationship between monetary policy and bank risk-taking by introducing a model wherein banks expend a level of costly monitoring effort to select low-risk projects, thereby reducing the risk associated with the loans they grant. The impact of monetary policy on bank risk-taking is examined through both theoretical models and empirical analysis. The paper compares theoretical models with different assumptions, revealing an unambiguous negative effect without the assumption of limited liability for banks, and an ambiguous effect with the assumption of limited liability for banks, influenced by the equity ratio. The empirical model employs unique quarterly data comprising balance sheet information for top-listed banks in the U.S. banking system from 2000 to 2017. The findings indicate that low-interest rates contribute to an increase in bank risk-taking. Moreover, this effect is more pronounced after the financial crisis and weaker before the crisis. Additionally, the impact is evident for undercapitalized banks and more substantial for those financed with a higher proportion of equity.
| Item Type: | Journal article | ||||||
|---|---|---|---|---|---|---|---|
| Alternative Title: | Monetary policy transmission and bank risk dynamics | ||||||
| Publication Title: | PLoS ONE | ||||||
| Creators: | Zhang, Z., Clovis, J., Moffatt, P. and Wang, W. | ||||||
| Publisher: | Public Library of Science | ||||||
| Date: | 18 April 2024 | ||||||
| Volume: | 19 | ||||||
| Number: | 4 | ||||||
| ISSN: | 1932-6203 | ||||||
| Identifiers: |
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| Rights: | This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. | ||||||
| Divisions: | Schools > Nottingham Business School | ||||||
| Record created by: | Jonathan Gallacher | ||||||
| Date Added: | 23 Sep 2024 08:47 | ||||||
| Last Modified: | 23 Sep 2024 08:47 | ||||||
| URI: | https://irep.ntu.ac.uk/id/eprint/52271 |
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