What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy?

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Title: What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy?
ISBN: 978-952-323-288-4
Author: Huang, Yiping ; Li, Xiang ; Wang, Chu
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
ISSN: 1456-5889
Series year: 2019
Series number: 16/2019
Year of publication: 2019
Publication date: 29.8.2019
Pages: 73
Subject (yso): rahapolitiikka; luotonanto; riskit; luotot; rahoituslaitokset
Keywords: Bofit-kokoelma;
JEL: E52; G23
Other keywords: Monetary Policy; Risk-taking; Nonbank Financial Institution; Peer-to-Peer Lending; Search-for-yield; Risk-shifting
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.
Rights: https://helda.helsinki.fi/bof/copyright


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