Asymmetric impacts of monetary policy and business cycles on bank risk-taking: Evidence from Emerging Asian markets

The paper examines the asymmetric impacts of monetary policy and business cycles on bank risk-taking. Using a sample of 212 banks in 13 emerging Asian economies over 2009–2019, the findings claim that the impacts of monetary policy and macroeconomic fluctuations are conditional on bank-individual characteristics. Our research has highlighted the procyclicality of bank risk-taking. Banks are more stable during boom cycles and riskier during bust cycles. Furthermore, the impacts of economic upturns and downturns also depend on bank-specific features, such as size, liquidity, and capitalisation. We provided further evidence demonstrating that bank size, capitalisation, efficiency, and diversity also play a vital role in reducing the adverse consequences of an expansionary monetary policy on bank risk-taking. Policy discussions are also discussed.