Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212924 
Year of Publication: 
2019
Series/Report no.: 
BOFIT Discussion Papers No. 16/2019
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
This paper uses loan application-level data from a peer-to-peer lending platform to study the risk-taking channel of monetary policy. By employing a direct ex-ante measure of risk-taking and estimating the simultaneous equations of loan approval and loan amount, we are the first to provide quantitative evidence of the impact of monetary policy on the risk-taking of nonbank financial institution. We find that the search-for-yield is the main workhorse of the risk-taking effect, while we do not observe consistent findings of risk-shifting from the liquidity change. Monetary policy easing is associated with a higher probability of granting loans to risky borrowers and a greater riskiness of credit allocation, but these changes do not necessarily relate to a larger loan amount on average.
Subjects: 
Monetary Policy
Risk-taking
Nonbank Financial Institution
Peer-to-Peer Lending
Search-for-yield
Risk-shifting
JEL: 
E52
G23
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-288-4
Document Type: 
Working Paper

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