The Global Crisis has renewed debate about the relationship between short-term interest rates and bank risk taking. Theory offers ambiguous and conflicting predictions. This column explores the relationship using confidential bank-level data from the US. Bank risk taking is found to be negatively associated with short-term interest rates, and this is more pronounced for highly capitalised banks. These findings can help inform the design of monetary policy.
Giovanni Dell'Ariccia, Luc Laeven, Gustavo Suarez, 02 August 2016
Vasso Ioannidou, Steven Ongena, José-Luis Peydró, 17 October 2007
Do low levels of short-term interest encourage risk-taking that can be considered ‘excessive’? Do low interest rates imply higher credit risk in the short-run? In the medium-run? New empirical research suggests that the answers are a resounding ‘yes’, a subtle ‘no’ and a qualifying ‘it depends’.
Most Read
-
Lalive, Magesan, Staubli
-
Chronopoulos, Kampanelis, Oto-Peralías, Wilson
-
Cagé, Dagorret, Grosjean, Jha
-
Escobari, Levy Yeyati
-
Caffarra, Scott Morton
-
Eichengreen, O'Rourke
-
Burgess, Sievertsen
-
Mitze, Kosfeld, Rode, Wälde
-
Heldring, Robinson
-
Eichengreen
Blogs&Reviews
-
Sapir
-
Bouchaud, Farmer
-
Baldwin
-
Kende
-
Angeloni
Vox eBooks

Bartsch, Bénassy-Quéré, Corsetti, Debrun, 15 December 2020
Don't Miss
Bartsch, Bénassy-Quéré, Corsetti, Debrun
Scheuer
Bozio, Garbinti, Goupille-Lebret, Guillot, Piketty
Events
-
28 - 29 January 2021 / Online - Zoom / Timberlake Consultants
-
29 - 29 January 2021 / Online /
-
5 - 5 February 2021 / Online /
-
12 - 12 February 2021 / Online / Erasmus University Rotterdam, Tilburg University and the University of Amsterdam
-
12 - 12 February 2021 / Online /
CEPR Policy Research
-
Gobillon, Solignac
-
Giglio, Maggiori, Stroebel, Weber
-
Summers, Fatás
-
Favero, Galasso
-
Butt, Churm, McMahon, Morotz, Schanz
-
Eichengreen, Avgouleas, Poiares Maduro, Panizza, Portes, Weder di Mauro, Wyplosz, Zettelmeyer
-
Baldwin, Beck, Bénassy-Quéré, Blanchard, Corsetti, De Grauwe, den Haan, Giavazzi, Gros, Kalemli-Ozcan, Micossi, Papaioannou, Pesenti, Pissarides , Tabellini, Weder di Mauro
-
Baldwin, Nakatomi
-
Thimann
-
Goodhart, Perotti