An analysis of involuntary excess reserves, monetary policy and risk-taking behaviour of Chinese Banks

In this paper, we examine the effects of monetary policy on the risk-taking behaviour of Chinese banks in the presence of involuntary excess reserves based on a sample of 95 banks. We find that involuntary excess reserves lead to more aggressive risk-taking suggesting that large involuntary excess reserves stimulate the rapid expansion of credit and the price bubble in the Chinese financial market. However, banks with larger involuntary excess reserves tend to reduce risk-taking more rapidly under the tightening monetary policy regime. The paper sheds light on the effectiveness of government monetary policy in reducing the risk-taking behaviour of banks in an emerging market where involuntary excess reserves are present.

Title:	An analysis of involuntary excess reserves, monetary policy and risk-taking behaviour of Chinese Banks
Authors:	Vu, Hong Thai Nguyen Boateng, Agyenim
Keywords:	Involuntary excess reserve, Banks, Monetary policy, China, Risk-taking
Issue Date:	2015
Publisher:	ELSEVIER SCIENCE INC, 360 PARK AVE SOUTH, NEW YORK, NY 10010-1710 USA
Citation:	ISIKNOWLEDGE
Abstract:	In this paper, we examine the effects of monetary policy on the risk-taking behaviour of Chinese banks in the presence of involuntary excess reserves based on a sample of 95 banks. We find that involuntary excess reserves lead to more aggressive risk-taking suggesting that large involuntary excess reserves stimulate the rapid expansion of credit and the price bubble in the Chinese financial market. However, banks with larger involuntary excess reserves tend to reduce risk-taking more rapidly under the tightening monetary policy regime. The paper sheds light on the effectiveness of government monetary policy in reducing the risk-taking behaviour of banks in an emerging market where involuntary excess reserves are present. (C) 2014 Elsevier Inc. All rights reserved.
Description:	INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS Volume: 37 Pages: 63-72 Published: JAN 2015 ; TNS05822
URI:	http://www.sciencedirect.com/science/article/pii/S1057521914001872 http://repository.vnu.edu.vn/handle/VNU_123/33079
ISSN:	1057-5219
Appears in Collections:	Bài báo của ĐHQGHN trong Web of Science