Research On Bank Risk-taking Channel Of Monetary Policy

The transmission mechanism of monetary policy, which has been broadly studied, is an important branch of macroeconomics. Significant progress has been made in the research of this theory, but the important role of risk has been neglected. Until the financial crises happened in2007, the relationship between monetary policy and bank risk-taking has been realized. The relationship which is important for the coordination of Macro Prudential and the goals of monetary policy has not been systematically studied so far, so the forward research of this topic is necessary.Bank risk-taking channel is a new topic arises in recent years. So in order to get a better understanding of the topic, we look back on the evolution of Bank risk-taking channel firstly. Then the related study of this topic has been reviewed in which we find some theory evidence for the following econometrics analysis. On these bases, we use180annual observations on30banks over the period2007-2012to verify if the existence of Bank risk-taking channel in China.The article has been organized as following. In the first part we introduce the background and the realistic value of the study. In the second part we have summarized the relate study into three directions, including whether Bank risk-taking channel is working, the ways such risk-taking channel may be operative, and Heterogeneity in the response of banks to a change in monetary policy.in the third part we summarize the relative theories and find some evidences for the following study. In the fourth part we use Fixed Effects Estimator and systematic GMM method and Threshold Panel Data Model to verify the relationship between monetary policy and bank risk-taking, and the non-linear relationship between bank risk-taking and bank asset size has also been explored. Besides, the robustness of the results has also been checked by using non-performing loan ratio as the proxy variable of the bank risk-taking. The last section summarizes the main conclusions and puts forward some policies. Through the econometrics analysis, we find that, Loose monetary policy will lead to an increase of the bank risk-taking, and "valuations, incomes and cash flows effect","search for yield effect" as well as "habit effect" are operative, and asset size, Capital adequacy rate and market power have threshold effect on risk-taking channel. At last we also explored the nonlinear form of relationship between asset size and the bank risk-taking.