## Does Prolonged Monetary Policy Easing Increase Financial Vulnerability?

_IMF Working Papers, March 24, 2017_

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## Bibliographic details
- Authors: Stephen Cecchetti, Tommaso Mancini-Griffoli, Machiko Narita
- Published: March 24, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475588644.001

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### Study overview
- Authors: Stephen Cecchetti, Tommaso Mancini-Griffoli, Machiko Narita
- Publication: IMF Working Paper No. 2017/065
- Date: March 24, 2017
- Pages: 31
- DOI: https://doi.org/10.5089/9781475588644.001
- Sample and scope:
  - Firm-level data for approximately 1,000 bank and nonbank financial institutions
  - Coverage: 22 countries
  - Period: past 15 years

### Key findings on risk-taking and vulnerability
- Leverage and vulnerability:
  - The leverage ratio increases for banks and nonbanks as domestic monetary policy easing persists.
  - Other measures of firm-level vulnerability also increase as domestic monetary policy easing persists.
- Cross-border and spillover effects:
  - Cross-border effects are notable.
  - Effects of roughly similar magnitude are observed on foreign financial sector firms when the U.S. eases policy.
- Non-linearity and timing:
  - Results appear non-linear, with risk-taking behavior rising most quickly at the onset of monetary policy easing.
- Robustness:
  - Results appear robust to a variety of specifications.

### Subject areas and keywords (as listed)
- Subject: Accommodative monetary policy; Asset and liability management; Asset management; Banking; Bond yields; Financial institutions; Financial sector policy and analysis; Financial sector risk; Financial services; Investment banking; Monetary policy
- Keywords include: Accommodative monetary policy; Africa; Asset management; asset-to-equity leverage ratio; Banks; Bond yields; financial institution leverage; Financial sector risk; financial stability; financial vulnerability; Global; interest rate; Investment banking; leverage benchmark; monetary policy; monetary policy easing; monetary policy impulse; monetary policy transmission mechanisms; nonbank financial institutions; nonbank leverage; prolonged monetary policy easing; quarter; risk-taking behavior; spillovers; WP

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_Source: https://www.imf.org/en/publications/wp/issues/2017/03/24/does-prolonged-monetary-policy-easing-increase-financial-vulnerability-44760_