Monetary Policy, Bank Leverage, and Financial Stability

Monetary Policy, Bank Leverage, and Financial Stability
This paper develops a model to assess how monetary policy rates affect bank risk-taking. In the model, a reduction in the risk-free rate increases lending profitability by reducing funding costs and increasing the surplus the monopolistic bank extracts from borrowers. Under limited liability, this increased profitability affects only upside READ MORE...

Publication date: October 2011
ISBN 9781463923235
$18.00

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