What Does Peer-to-Peer Lending Evidence Say About the Risk-Taking Channel of Monetary Policy?

71 Pages Posted: 14 Oct 2019

See all articles by Yiping Huang

Yiping Huang

Peking University

Xiang Li

Halle Institute for Economic Research

Chu Wang

Peking University - National School of Development

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

This paper uses loan application-level data from a peer-to-peer lending platform to study the risk-taking channel of monetary policy. By employing a direct ex-ante measure of risk-taking and estimating the simultaneous equations of loan approval and loan amount, we are the first to provide quantitative evidence of the impact of monetary policy on the risk-taking of nonbank financial institution. We find that the search-for-yield is the main workhorse of the risk-taking effect, while we do not observe consistent findings of risk-shifting from the liquidity change. Monetary policy easing is associated with a higher probability of granting loans to risky borrowers and a greater riskiness of credit allocation, but these changes do not necessarily relate to a larger loan amount on average.

Keywords: monetary policy, risk-taking, nonbank financial institution, peer-to-peer lending, search-for-yield, risk-shifting

JEL Classification: E520, G230

Suggested Citation

Huang, Yiping and Li, Xiang and Wang, Chu, What Does Peer-to-Peer Lending Evidence Say About the Risk-Taking Channel of Monetary Policy? (2019). CESifo Working Paper No. 7792. Available at SSRN: https://ssrn.com/abstract=3468021

Yiping Huang (Contact Author)

Peking University ( email )

Beijing, 100871
China

Xiang Li

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Chu Wang

Peking University - National School of Development ( email )

Beijing, 100871
China

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