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Monetary policy, economic uncertainty and bank risk: Cross-country evidence
Journal article   Peer reviewed

Monetary policy, economic uncertainty and bank risk: Cross-country evidence

Ji Wu, Yuanyun Yan, Minghua Chen and Bang Nam Jeon
Journal of international money and finance, v 122, 102580
Apr 2022
DOI: https://doi.org/10.1016/j.jimonfin.2021.102580
Featured in Collection :   UN Sustainable Development Goals @ Drexel

Abstract

Bank risk Economic uncertainty Monetary policy
•This paper investigates how economic uncertainty affects the monetary policy-bank risk nexus.•We use the panel data of 1100 public banks in 43 economies during the period of 2000–2018.•We present evidence that the force of the “risk-taking channel” of monetary policy is weakened amid higher economic uncertainty.•This finding is in line with the hypothesis of the “option value of waiting”. This paper investigates how economic uncertainty affects the monetary policy–bank risk nexus. Using panel data on approximately 1100 public banks in 43 economies during the period of 2000–2018, we find consistent evidence that the “risk-taking channel” of monetary policy is weakened amid higher economic uncertainty. This finding is in line with the “option value of waiting” hypothesis, which suggests that economic uncertainty may induce banks to withhold their adjustments of risk-taking strategies when monetary policy is altered.

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20 Record Views
21 citations in Web of Science
19 citations in Scopus

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UN Sustainable Development Goals (SDGs)

This publication has contributed to the advancement of the following goals:

#8 Decent Work and Economic Growth
#9 Industry, Innovation and Infrastructure
#1 No Poverty
#10 Reduced Inequalities

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Collaboration types
Domestic collaboration
International collaboration
Web of Science research areas
Business, Finance
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