Bank capital matters for risk-taking channel of monetary policy, Norges Bank paper finds
Less capitalised banks more willing to take on risky borrowers
Banks with higher levels of capital are less willing to take risks, and therefore dampen the effects of the risk-taking channel of monetary policy, a paper published on March 15 by Norges Bank finds.
"With more skin in the game, the willingness to take risks is reduced," author Artashes Karapetyan writes in the working paper, The risk-taking channel of monetary policy in Norway.
Nevertheless, the risk-taking channel of policy is still functioning in Norway, Karapetyan finds. Based on a dataset
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