Monetary Policy and Long-Run Systemic Risk-Taking

45 Pages Posted: 21 Sep 2018

See all articles by Gilbert Colletaz

Gilbert Colletaz

University of Orleans

Grégory Levieuge

Banque de France; University of Orleans - Laboratoire d'économie d'Orléans

Alexandra Popescu

Universite de Poitiers

Date Written: September 1, 2018

Abstract

As an extension to the literature on the risk-taking channel of monetary policy, this paper studies the existence of a systemic risk-taking channel (SRTC) in the Eurozone, through an original macroeconomic perspective based on causality measures. Because the SRTC is effective after an “incubation period”, we make a distinction between short and long-term causality, following the methodology proposed by Dufour and Taamouti (2010). We find that causality from monetary policy to systemic risk, while not significant in the very short term, robustly represents 75 to 100% of the total dependence between the two variables in the long run. Reverse causality is rejected: systemic risk did not influence the policy of the European Central Bank before the global financial crisis. However, central banks must be aware that a too loose monetary policy stance may be conducive to a build-up of systemic risk.

Keywords: Monetary Policy, Systemic Risk-Taking, Long Run Causality, SRisk

JEL Classification: E52 ; E58 ; G21

Suggested Citation

Colletaz, Gilbert and Levieuge, Grégory and Popescu, Alexandra, Monetary Policy and Long-Run Systemic Risk-Taking (September 1, 2018). Banque de France Working Paper No. 694. Available at SSRN: https://ssrn.com/abstract=3250617 or http://dx.doi.org/10.2139/ssrn.3250617

Gilbert Colletaz

University of Orleans ( email )

Rue de Blois
B.P. 6739
45067 Orleans Cedex 2, Orleans cedex 2 45067
France

Grégory Levieuge (Contact Author)

Banque de France ( email )

Paris
France

University of Orleans - Laboratoire d'économie d'Orléans ( email )

Rue de Blois
Centre
France

Alexandra Popescu

Universite de Poitiers ( email )

93 avenue du recteur Pineau
Poitiers, 86000
France

Register to save articles to
your library

Register

Paper statistics

Downloads
18
Abstract Views
112
PlumX Metrics