Research Article
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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.

References

  • Abbate, A., & Thaler, D. (2014). Monetary policy effects on bank risk taking. EUI Working Papers, European University Institute, WP No: ECO 2014/07.
  • Altunbas, Y., Gambacorta, L., & Marques-Ibanez, D. (2010). Does monetary policy affect bank risk-taking?. ECB Working Paper Series, WP No: 1166. (Accessed on 01.10.2020), https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1166.pdf
  • Buch, C. M., Eickmeier, S., & Prieto, E. (2014). In search for yield? Survey-based evidence on bank risk taking. Journal of Economic Dynamics and Control, 43, 12-30. http://dx.doi.org/10.1016/j.jedc.2014.01.017
  • Bonfim, D., & Soares, C. (2018). The risk‐taking channel of monetary policy: Exploring all avenues. Journal of Money, Credit and Banking, 50(7), 1507-1541. https://doi.org/10.1111/jmcb.12500
  • Adrian, T., Estrella, A., & Shin, H. S. (2019). Risk‐taking channel of monetary policy. Financial Management, 48(3), 725-738. https://doi.org/10.1111/fima.12256
  • Aktan, N. A., Akay, H. K., & Cinar, M. (2014). The Effect of monetary policy on banks risk taking in Turkey. International Journal of Management Economics and Business, 10(21), 55-67. http://dx.doi.org/10.11122/ijmeb.2014.10.21.476
  • Angeloni, I., Faia, E., & Duca, M. L. (2015). Monetary policy and risk taking. Journal of Economic Dynamics and Control, 52, 285-307. https://doi.org/10.1016/j.jedc.2014.12.001
  • Binici, M., & Köksal B. (2012). Is the leverage of Turkish banks procyclical?. Central Bank Review, (12), 11-24.
  • Borio, C., & Zhu, H. (2012). Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?. BIS Working Papers, WP. No: 268. Switzerland: Bank for International Settlements.
  • De Nicolò, G., Dell’Ariccia, G., Laeven, L., & Valencia, F. (2010). Monetary policy and bank risk taking. IMF Working Paper, (July 1, 2010). http://dx.doi.org/10.2139/ssrn.1654582
  • Delis, M. D., & Kouretas, G. P. (2011). Interest rates and bank risk-taking. Journal of Banking & Finance, 35(4), 840-855. http://dx.doi.org/10.1016/j.jbankfin.2010.09.032
  • Delis, M. D., Hasan, I., & Mylonidis, N. (2017). The risk‐taking channel of monetary policy in the US: Evidence from corporate loan data. Journal of Money, Credit and Banking, 49(1), 187-213. https://doi.org/10.1111/jmcb.12372
  • DellʼAriccia, G., Laeven, L., & Marquez, R. (2014). Real interest rates, leverage, and bank risk-taking. Journal of Economic Theory, 149, 65-99. http://dx.doi.org/10.1016/j.jet.2013.06.002
  • Dell'Ariccia, G., Laeven, L., & Suarez, G. A. (2017). Bank leverage and monetary policy's risk‐taking channel: evidence from the United States. The Journal of Finance, 72(2), 613-654. https://doi.org/10.1111/jofi.12467
  • Drakos, A. A., Kouretas, G. P., & Tsoumas, C. (2016). Ownership, interest rates and bank risk-taking in Central and Eastern European countries. International Review of Financial Analysis, 45, 308-319. https://doi.org/10.1016/j.irfa.2014.08.004
  • FED (2015). Economic Research & Data, Board of Governors of the Federal Reserve System (US). http://www.federalreserve.gov/releases/h15/data.htm
  • Gaggl, P., & Valderrama, M. T. (2010). Does a low ınterest rate environment affect risk taking in Austria?. Monetary Policy and the Economy, 4(4), 32-48.
  • Gambacorta, L. (2009). Monetary policy and the risk-taking channel. BIS Quarterly Review December, 43-53. Gersl, A., Jakubik, P., Kowalczyk, D., Ongena, S., & Peydro, J. L. (2015). Monetary conditions and banks’ behaviour in the Czech Republic. Open Economies Review, 26(3), 407-445. https://doi.org/10.1007/s11079-015-9355-y
  • Paligorova, T., & Santos, J. A. (2017). Monetary policy and bank risk-taking: Evidence from the corporate loan market. Journal of Financial Intermediation, 30, 35-49. https://doi.org/10.1016/j.jfi.2016.11.003
  • Gumata, N., & Ndou, E. (2017). The banking risk-taking channel of monetary policy in South Africa. In: Bank Credit Extension and Real Economic Activity in South Africa, (pp. 335-362). Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-43551-0_15
  • Huang, Y., Li, X., & Wang, C. (2019). What Does Peer-to-Peer Lending Evidence Say About the Risk-taking Channel of Monetary Policy?. CESifo Working Papers, WP. No. 7792. (Accessed on 10.02.2020), https://ssrn.com/abstract=3468021
  • Jimenez, G., Ongena, S., Peydró, J. L., & Saurina, J. (2014). Hazardous times for monetary policy: What do twenty‐three million bank loans say about the effects of monetary policy on credit risk‐taking?. Econometrica, 82(2), 463-505. https://doi.org/10.3982/ECTA10104
  • Lopez, M., Tenjo, F., & Zarate, H. (2012). The risk-taking channel in Colombia revisited. Ensayos sobre Política Económica, 30(68), 274-295.
  • Maddaloni, A., & Peydro, J. L. (2011). Bank risk-taking, securitization, supervision, and low interest rates: Evidence from the Euro-area and the US lending standards. The review of financial studies, 24(6), 2121-2165. http://dx.doi.org/10.1093/rfs/hhr015 Neuenkirch, M., & Nöckel, M. (2018). The risk-taking channel of monetary policy transmission in the euro area. Journal of Banking & Finance, 93, 71-91. https://doi.org/10.1016/j.jbankfin.2018.06.003
  • Oktar, S., Eroğlu, N., & Eroğlu, İ. (2013). 2008 global financial crisis, monetary transmission channels and experimental policy efforts of central bank of the republic of Turkey. Marmara University Journal of Economic & Administrative Sciences,, 35(2), 1-28. http://dx.doi.org/10.14780/iibdergi.201324457
  • Rajan, Raghuram G. (2006), "Has Finance Made the World Riskier?", European Financial Management, 12(4), 499–533. http://dx.doi.org/10.1111/j.1468-036X.2006.00330.x
  • Tabak, B., Laiz, M., & Cajueiro, D. (2010). Financial Stability and Monetary Policy-The Case of Brazil. The Banco Central do Brasil Working Paper Series, WP No: 217, 1-61. (Accessed on 10.09.2015), https://www.bcb.gov.br/pec/wps/ingl/wps217.pdf
  • CBRT (2013). Parasal Aktarım Mekanizması. Ankara: Türkiye Cumhuriyet Merkez Bankası.
  • World Bank (2020). World Development Indicators. https://databank.worldbank.org/source/world-development-indicators
  • Yellen, J. L. (2011). Assessing Potential Financial Imbalances in an Era of Accommodative Monetary Policy. In: Bank of Japan 2011 International Conference: Real and Financial Linkage and Monetary Policy, June 1, Tokyo. http://www.federalreserve.gov/newsevents/speech/yellen20110601a.pdf

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

Project Number

Project Number: NKUBAP.07.GA.18.140.

References

  • Abbate, A., & Thaler, D. (2014). Monetary policy effects on bank risk taking. EUI Working Papers, European University Institute, WP No: ECO 2014/07.
  • Altunbas, Y., Gambacorta, L., & Marques-Ibanez, D. (2010). Does monetary policy affect bank risk-taking?. ECB Working Paper Series, WP No: 1166. (Accessed on 01.10.2020), https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1166.pdf
  • Buch, C. M., Eickmeier, S., & Prieto, E. (2014). In search for yield? Survey-based evidence on bank risk taking. Journal of Economic Dynamics and Control, 43, 12-30. http://dx.doi.org/10.1016/j.jedc.2014.01.017
  • Bonfim, D., & Soares, C. (2018). The risk‐taking channel of monetary policy: Exploring all avenues. Journal of Money, Credit and Banking, 50(7), 1507-1541. https://doi.org/10.1111/jmcb.12500
  • Adrian, T., Estrella, A., & Shin, H. S. (2019). Risk‐taking channel of monetary policy. Financial Management, 48(3), 725-738. https://doi.org/10.1111/fima.12256
  • Aktan, N. A., Akay, H. K., & Cinar, M. (2014). The Effect of monetary policy on banks risk taking in Turkey. International Journal of Management Economics and Business, 10(21), 55-67. http://dx.doi.org/10.11122/ijmeb.2014.10.21.476
  • Angeloni, I., Faia, E., & Duca, M. L. (2015). Monetary policy and risk taking. Journal of Economic Dynamics and Control, 52, 285-307. https://doi.org/10.1016/j.jedc.2014.12.001
  • Binici, M., & Köksal B. (2012). Is the leverage of Turkish banks procyclical?. Central Bank Review, (12), 11-24.
  • Borio, C., & Zhu, H. (2012). Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?. BIS Working Papers, WP. No: 268. Switzerland: Bank for International Settlements.
  • De Nicolò, G., Dell’Ariccia, G., Laeven, L., & Valencia, F. (2010). Monetary policy and bank risk taking. IMF Working Paper, (July 1, 2010). http://dx.doi.org/10.2139/ssrn.1654582
  • Delis, M. D., & Kouretas, G. P. (2011). Interest rates and bank risk-taking. Journal of Banking & Finance, 35(4), 840-855. http://dx.doi.org/10.1016/j.jbankfin.2010.09.032
  • Delis, M. D., Hasan, I., & Mylonidis, N. (2017). The risk‐taking channel of monetary policy in the US: Evidence from corporate loan data. Journal of Money, Credit and Banking, 49(1), 187-213. https://doi.org/10.1111/jmcb.12372
  • DellʼAriccia, G., Laeven, L., & Marquez, R. (2014). Real interest rates, leverage, and bank risk-taking. Journal of Economic Theory, 149, 65-99. http://dx.doi.org/10.1016/j.jet.2013.06.002
  • Dell'Ariccia, G., Laeven, L., & Suarez, G. A. (2017). Bank leverage and monetary policy's risk‐taking channel: evidence from the United States. The Journal of Finance, 72(2), 613-654. https://doi.org/10.1111/jofi.12467
  • Drakos, A. A., Kouretas, G. P., & Tsoumas, C. (2016). Ownership, interest rates and bank risk-taking in Central and Eastern European countries. International Review of Financial Analysis, 45, 308-319. https://doi.org/10.1016/j.irfa.2014.08.004
  • FED (2015). Economic Research & Data, Board of Governors of the Federal Reserve System (US). http://www.federalreserve.gov/releases/h15/data.htm
  • Gaggl, P., & Valderrama, M. T. (2010). Does a low ınterest rate environment affect risk taking in Austria?. Monetary Policy and the Economy, 4(4), 32-48.
  • Gambacorta, L. (2009). Monetary policy and the risk-taking channel. BIS Quarterly Review December, 43-53. Gersl, A., Jakubik, P., Kowalczyk, D., Ongena, S., & Peydro, J. L. (2015). Monetary conditions and banks’ behaviour in the Czech Republic. Open Economies Review, 26(3), 407-445. https://doi.org/10.1007/s11079-015-9355-y
  • Paligorova, T., & Santos, J. A. (2017). Monetary policy and bank risk-taking: Evidence from the corporate loan market. Journal of Financial Intermediation, 30, 35-49. https://doi.org/10.1016/j.jfi.2016.11.003
  • Gumata, N., & Ndou, E. (2017). The banking risk-taking channel of monetary policy in South Africa. In: Bank Credit Extension and Real Economic Activity in South Africa, (pp. 335-362). Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-43551-0_15
  • Huang, Y., Li, X., & Wang, C. (2019). What Does Peer-to-Peer Lending Evidence Say About the Risk-taking Channel of Monetary Policy?. CESifo Working Papers, WP. No. 7792. (Accessed on 10.02.2020), https://ssrn.com/abstract=3468021
  • Jimenez, G., Ongena, S., Peydró, J. L., & Saurina, J. (2014). Hazardous times for monetary policy: What do twenty‐three million bank loans say about the effects of monetary policy on credit risk‐taking?. Econometrica, 82(2), 463-505. https://doi.org/10.3982/ECTA10104
  • Lopez, M., Tenjo, F., & Zarate, H. (2012). The risk-taking channel in Colombia revisited. Ensayos sobre Política Económica, 30(68), 274-295.
  • Maddaloni, A., & Peydro, J. L. (2011). Bank risk-taking, securitization, supervision, and low interest rates: Evidence from the Euro-area and the US lending standards. The review of financial studies, 24(6), 2121-2165. http://dx.doi.org/10.1093/rfs/hhr015 Neuenkirch, M., & Nöckel, M. (2018). The risk-taking channel of monetary policy transmission in the euro area. Journal of Banking & Finance, 93, 71-91. https://doi.org/10.1016/j.jbankfin.2018.06.003
  • Oktar, S., Eroğlu, N., & Eroğlu, İ. (2013). 2008 global financial crisis, monetary transmission channels and experimental policy efforts of central bank of the republic of Turkey. Marmara University Journal of Economic & Administrative Sciences,, 35(2), 1-28. http://dx.doi.org/10.14780/iibdergi.201324457
  • Rajan, Raghuram G. (2006), "Has Finance Made the World Riskier?", European Financial Management, 12(4), 499–533. http://dx.doi.org/10.1111/j.1468-036X.2006.00330.x
  • Tabak, B., Laiz, M., & Cajueiro, D. (2010). Financial Stability and Monetary Policy-The Case of Brazil. The Banco Central do Brasil Working Paper Series, WP No: 217, 1-61. (Accessed on 10.09.2015), https://www.bcb.gov.br/pec/wps/ingl/wps217.pdf
  • CBRT (2013). Parasal Aktarım Mekanizması. Ankara: Türkiye Cumhuriyet Merkez Bankası.
  • World Bank (2020). World Development Indicators. https://databank.worldbank.org/source/world-development-indicators
  • Yellen, J. L. (2011). Assessing Potential Financial Imbalances in an Era of Accommodative Monetary Policy. In: Bank of Japan 2011 International Conference: Real and Financial Linkage and Monetary Policy, June 1, Tokyo. http://www.federalreserve.gov/newsevents/speech/yellen20110601a.pdf
There are 30 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Durmuş Çağrı Yıldırım 0000-0003-4168-2792

Seyfettin Erdoğan 0000-0003-2790-4221

Ömer Esen 0000-0002-4762-9282

Emrah İsmail Çevik 0000-0002-8155-1597

Project Number Project Number: NKUBAP.07.GA.18.140.
Publication Date March 31, 2023
Published in Issue Year 2023 Volume: 21 Issue: 1

Cite

APA Yıldırım, D. Ç., Erdoğan, S., Esen, Ö., Çevik, E. İ. (2023). DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH. Journal of Management and Economics Research, 21(1), 40-58. https://doi.org/10.11611/yead.1134078
AMA Yıldırım DÇ, Erdoğan S, Esen Ö, Çevik Eİ. DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH. Journal of Management and Economics Research. March 2023;21(1):40-58. doi:10.11611/yead.1134078
Chicago Yıldırım, Durmuş Çağrı, Seyfettin Erdoğan, Ömer Esen, and Emrah İsmail Çevik. “DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH”. Journal of Management and Economics Research 21, no. 1 (March 2023): 40-58. https://doi.org/10.11611/yead.1134078.
EndNote Yıldırım DÇ, Erdoğan S, Esen Ö, Çevik Eİ (March 1, 2023) DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH. Journal of Management and Economics Research 21 1 40–58.
IEEE D. Ç. Yıldırım, S. Erdoğan, Ö. Esen, and E. İ. Çevik, “DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH”, Journal of Management and Economics Research, vol. 21, no. 1, pp. 40–58, 2023, doi: 10.11611/yead.1134078.
ISNAD Yıldırım, Durmuş Çağrı et al. “DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH”. Journal of Management and Economics Research 21/1 (March 2023), 40-58. https://doi.org/10.11611/yead.1134078.
JAMA Yıldırım DÇ, Erdoğan S, Esen Ö, Çevik Eİ. DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH. Journal of Management and Economics Research. 2023;21:40–58.
MLA Yıldırım, Durmuş Çağrı et al. “DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH”. Journal of Management and Economics Research, vol. 21, no. 1, 2023, pp. 40-58, doi:10.11611/yead.1134078.
Vancouver Yıldırım DÇ, Erdoğan S, Esen Ö, Çevik Eİ. DOES THE RISK-TAKING OR RISK-SHIFTING CHANNEL OF MONETARY POLICY WORK IN DEVELOPING COUNTRIES? EVIDENCE FROM TVP-VAR APPROACH. Journal of Management and Economics Research. 2023;21(1):40-58.