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Full-Text Articles in International Economics
Monetary Policy And Systemic Risk-Taking In The Euro Area Banking Sector, Alain Kabundi, Francisco Nadal-De Simone
Monetary Policy And Systemic Risk-Taking In The Euro Area Banking Sector, Alain Kabundi, Francisco Nadal-De Simone
WCBT Faculty Publications
Available empirical evidence on the significance of the (micro) risk-taking channel of monetary policy is not enough to indicate a threat to financial stability. Evidence of risk-taking with systemic risk implications is necessary. Statistical measures that capture systemic risk in all its forms within a structural factor-augmented vector autoregressive model suggest that conventional and unconventional monetary policies have resulted in systemic risk-taking in the euro area banking sector. Systemic risk has taken the form of an increase in the banking sector’s vulnerability via contagion and interconnectedness. Banks’ balance sheets, however, do not account for the full transmission from (micro) risk …