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Monetary policy uncertainty, market structure and bank risk-taking: Evidence from China

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  • Ge, Xinyu
  • Liu, Yan
  • Zhuang, Jiali

Abstract

We identify the impact of monetary policy uncertainty (MPU) on bank risk-taking by exploiting the regional heterogeneity of bank market structure in China. Our findings show that a bank facing more competition will take more risks following an increase in MPU, compared with a bank facing less competition, thus confirm a positive impact of MPU on bank risk-taking. In addition, we find that MPU positively affects bank risk-taking by deteriorating its profitability and balance sheet. These findings suggest that the central bank can alleviate bank risks by enhancing the transparency of monetary policy.

Suggested Citation

  • Ge, Xinyu & Liu, Yan & Zhuang, Jiali, 2023. "Monetary policy uncertainty, market structure and bank risk-taking: Evidence from China," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007759
    DOI: 10.1016/j.frl.2022.103599
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    References listed on IDEAS

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    Cited by:

    1. He, Wenjia & He, Wenjing & Xu, Dandan & Yue, Pengpeng, 2023. "Economic volatility, banks’ risk accumulation and systemic risk," Finance Research Letters, Elsevier, vol. 57(C).
    2. Si, Deng-Kui & Zhuang, Jiali & Ge, Xinyu & Yu, Yong, 2024. "The nexus between trade policy uncertainty and corporate financialization: Evidence from China," China Economic Review, Elsevier, vol. 84(C).

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    More about this item

    Keywords

    Monetary policy uncertainty; Market structure; Bank risk-taking; Regional heterogeneity;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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