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Identification of risk-taking channel of monetary policy in Cameroon

Author

Listed:
  • Marcel Takoulac Kamta

    (University of Dschang, FSEG, Cameroon)

  • Arsène Aurelien Njamen Kengdo

    (University of Dschang, FSEG, Cameroon)

  • Alain Bertrand Ndzana Mekia

    (University of Dschang, FSEG, Cameroon)

  • Franklin Dongmo Tsobjio

    (University of Dschang, FSEG, Cameroon)

Abstract

The objective of this research work is to identify the risk-taking channel of monetary policy in Cameroun. The credit risk is measure by the ratio of overdue debts on gross credit. The data used are those of 6 commercial banks collected from National Credit Council (CNC), within the period 2006-2016.The model is estimated with two methods: the Dynamic Ordinary Least Square and Fully Modify Ordinary Least Square. The Results show that the Central Bank’s key interest rate (TIAO) negatively affects the level of overdue debts granted by commercial banks in Cameroon. However, its impact is not significant considering the hole period. Robustness check reveals that, risk-taking channel exist in Cameroon after recent financial crisis. It also appears that credit supply and inflation significantly enhance credit risk; while banking capital significantly harms credit risk. In addition, a reduction of interest rates increases banks risk-taking especially when Gross Domestic Product growth rate is feeble. Therefore, we recommend that the monetary authorities avoid practicing low key interest rates over a long period, because it is likely to increase bank risk-taking.

Suggested Citation

  • Marcel Takoulac Kamta & Arsène Aurelien Njamen Kengdo & Alain Bertrand Ndzana Mekia & Franklin Dongmo Tsobjio, 2020. "Identification of risk-taking channel of monetary policy in Cameroon," Economic Research Guardian, Mutascu Publishing, vol. 10(2), pages 83-96, December.
    • Handle: RePEc:wei:journl:v:10:y:2020:i:2:p:83-96
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    References listed on IDEAS

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    More about this item

    Keywords

    Risk-taking channel; BEAC; Monetary policy; Overdue debts;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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