Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Monetary policy, risk taking, and pricing
T2 - evidence from a quasi-natural experiment
AU - Ioannidou, Vasso
AU - Ongena, Steven
AU - Peydró, José Luis
PY - 2015
Y1 - 2015
N2 - We study the risk-taking channel of monetary policy in Bolivia, a dollarized country where monetary changes are transmitted exogenously from the USA. We find that a lower policy rate spurs the granting of riskier loans, to borrowers with worse credit histories, lower ex-ante internal ratings, and weaker ex-post performance (acutely so when the rate subsequently increases). Effects are stronger for small firms borrowing from multiple banks. To uniquely identify risk-taking, we assess collateral coverage, expected returns, and risk premia of the newly granted riskier loans, finding that their returns and premia are actually lower, especially at banks suffering from agency problems.
AB - We study the risk-taking channel of monetary policy in Bolivia, a dollarized country where monetary changes are transmitted exogenously from the USA. We find that a lower policy rate spurs the granting of riskier loans, to borrowers with worse credit histories, lower ex-ante internal ratings, and weaker ex-post performance (acutely so when the rate subsequently increases). Effects are stronger for small firms borrowing from multiple banks. To uniquely identify risk-taking, we assess collateral coverage, expected returns, and risk premia of the newly granted riskier loans, finding that their returns and premia are actually lower, especially at banks suffering from agency problems.
KW - monetary policy
KW - bank
KW - risk taking
U2 - 10.1093/rof/rfu035
DO - 10.1093/rof/rfu035
M3 - Journal article
VL - 19
SP - 95
EP - 144
JO - Review of Finance
JF - Review of Finance
SN - 1572-3097
IS - 1
ER -