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Monetary policy, risk taking, and pricing: evidence from a quasi-natural experiment

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Monetary policy, risk taking, and pricing : evidence from a quasi-natural experiment. / Ioannidou, Vasso; Ongena, Steven; Peydró, José Luis.

In: Review of Finance, Vol. 19, No. 1, 2015, p. 95-144.

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Ioannidou, Vasso ; Ongena, Steven ; Peydró, José Luis. / Monetary policy, risk taking, and pricing : evidence from a quasi-natural experiment. In: Review of Finance. 2015 ; Vol. 19, No. 1. pp. 95-144.

Bibtex

@article{f86ad85dfa3944c3a385736b2df55f4e,
title = "Monetary policy, risk taking, and pricing: evidence from a quasi-natural experiment",
abstract = "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.",
keywords = "monetary policy, bank, risk taking",
author = "Vasso Ioannidou and Steven Ongena and Peydr{\'o}, {Jos{\'e} Luis}",
year = "2015",
doi = "10.1093/rof/rfu035",
language = "English",
volume = "19",
pages = "95--144",
journal = "Review of Finance",
issn = "1572-3097",
publisher = "Oxford University Press",
number = "1",

}

RIS

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 -