DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH

Year 2023, Volume: 21 Issue: 1, 40 - 58, 31.03.2023

Durmuş Çağrı Yıldırım , Seyfettin Erdoğan , Ömer Esen , Emrah İsmail Çevik

https://doi.org/10.11611/yead.1134078

Abstract

In the study, the validity of the risk-taking channel was investigated using the monthly data between 2003 and 2018, in particular for Brazil, South Africa and Turkey countries. According to test results, for Turkey the response of leverage rate to unexpected increases in policy interest rate was measured positively; for Brazil it was measured positively and for South Africa, it was measured positively during the sample period.
Finally, for all countries the reaction of industrial production to shocks in the policy interest rate was calculated to be negative during the sample period. Thus, it is concluded that the risk-taking channel is effective for these countries during the analysis period (especially in times of crisis), and that monetary policy could be used as an effective tool for managing macroeconomic risk.

Keywords

Risk‐Taking Channel, TVP-VAR, Monetary Transmission Mechanism, Developing Countries

Supporting Institution

Tekirdag Namık Kemal University

Project Number

Project Number: NKUBAP.07.GA.18.140.

Thanks

This work was supported by Research Fund of the Tekirdag Namık Kemal University. Project Number: NKUBAP.07.GA.18.140.

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