Risk-taking channel, bank lending channel and the “paradox of credibility”

Montes, Gabriel Caldas; Peixoto, Gabriel Barros Tavares

doi:10.1016/j.econmod.2014.02.023

Cited by 21 publications

(1 citation statement)

References 28 publications

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“…The banking system plays an important role in financing all over the world, and accordingly, in Iran's economy, banks play an important role in financing investment projects [47]. From this point of view, the monetary policy risk channel has a negative effect on the real activities of the economy by disrupting the strength of the banking system, because one of the negative consequences of risk-taking is the supply of risky loans and the increase in the probability of non-repayment of the loan, and as a result, reducing the ability of banks to lend to Investment projects [47][48][49].…”

Section: Introductionmentioning

confidence: 99%

Investigating the monetary policy risk channel based on the dynamic stochastic general equilibrium model: Empirical evidence from Iran

Peykani,

Sargolzaei,

Takaloo

et al. 2023

PLoS ONE

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Investigating the credit channel and monetary policy risk channel in Iran’s economy is the aim of this article. According to empirical studies, expansionary monetary policy increases the risk of banks, and on the other hand, the risk of banks affects economic activities and price levels. In order to investigate the mechanism of the credit channel and the risk channel (as a new channel), the effect of monetary policy on real variables and price levels in Iran’s economy, the Dynamic Stochastic General Equilibrium (DSGE) model has been used by entering the information of the banking system and considering moral hazard and adverse choices. The obtained results show that there is a credit channel and a monetary policy risk channel for Iran’s economy, and the expansionary monetary policy shock causes output, inflation, private sector consumption, investment, net worth in the economy and lending to increase. Also, when a credit shock occurs, with the increase in banks’ lending power, production, private sector consumption, investment, net worth and total lending increase and the inflation level decreases. Also, by applying the risk shock caused by the increase in inflation and the decrease in consumption and investment, the volume of lending increases and the level of production does not change much.

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