Financial Stability And Monetary Policy - The Case Of Brazil

This paper investigates the effects of monetary policy over banks' loans growth and non-performing loans for the recent period in Brazil. The authors contribute to the literature on bank lending and risk taking channel by showing that during periods of loosening/tightening monetary policy, banks increase/decrease their loans. Moreover, these results illustrate that large, well capitalized and liquid banks absorb better the effects of monetary policy shocks. They also find that low interest rates lead to an increase in credit risk exposure, supporting the existence of a risk-taking channel. Finally, they show that the impact of monetary policy differs across state-owned, foreign and private domestic banks. These results are important for developing and conducting monetary policy.

Provided by: Banco Central do Brasil Topic: CXO Date Added: Oct 2010 Format: PDF

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