Monetary Policy, Excessive Risk-Taking and Banking Crisis

9 Pages Posted: 20 Jul 2016

See all articles by Taha Zaghdoudi

Taha Zaghdoudi

University of Jendouba, Faculty of Law Economics and Management of Jendouba

Date Written: July 5, 2015

Abstract

This paper examines the relationship between monetary policy and banks excessive risk-taking and banking crisis. We use a panel of data consisting of 22 Latin American countries, the OECD and South-East Asia, which experienced banking crises between 1990 and 2013. Our empirical results show that the adoption of an expansionary monetary policy via an increase in the money supply and the application of low interest rates over an extended period of time may induce an increase in banks risk-taking. However, a restrictive monetary policy with high interest rates increases the risk of banking crisis.

Keywords: Monetary Policy, Bank Risk, Panel Co-Integration Test

JEL Classification: E44, E51, E52, G21

Suggested Citation

Zaghdoudi, Taha, Monetary Policy, Excessive Risk-Taking and Banking Crisis (July 5, 2015). Available at SSRN: https://ssrn.com/abstract=2811700 or http://dx.doi.org/10.2139/ssrn.2811700

Taha Zaghdoudi (Contact Author)

University of Jendouba, Faculty of Law Economics and Management of Jendouba ( email )

Avenue de l'U.M.A
Jendouba, TN 8189
Tunisia

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