Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216809 
Year of Publication: 
2015
Citation: 
[Journal:] Review of Finance [ISSN:] 1573-692X [Volume:] 19 [Issue:] 1 [Publisher:] Oxford University Press [Place:] Oxford [Year:] 2015 [Pages:] 95-144
Publisher: 
Oxford University Press, Oxford
Abstract: 
We study the risk-taking channel of monetary policy in Bolivia, a dollarized country where monetary changes are transmitted exogenously from the US. We find that a lower policy rate spurs the granting of riskier loans, to borrowers with worse credit histories, lower ex-ante internal ratings, and weaker ex-post performance (acutely so when the rate subsequently increases). Effects are stronger for small firms borrowing from multiple banks. To uniquely identify risk-taking we assess collateral coverage, expected returns and risk premia of the newly-granted riskier loans, finding that their returns and premia are actually lower, especially at banks suffering from agency problems.
Subjects: 
monetary policy
low short-term interest rates
softening lending standards
credit risk
liquidity risk
subprime borrowers
bank agency problems
duration analysis
JEL: 
E44
G01
G21
G28
L14
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)
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