Credit and credit aggregates, Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, International financial markets, Lender of last resort, , Monetary policy implementation, Payment clearing and settlement systems
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When Is It Less Costly for Risky Firms to Borrow? Evidence from the Bank Risk- Taking Channel of Monetary Policy
In an investigation of banks’ loan pricing policies in the United States over the past two decades, this study finds supporting evidence for the bank risk-taking channel of monetary policy. We show that banks charge lower spreads when they lend to riskier borrowers relative to the spreads they charge on loans to safer borrowers in periods of low short-term rates compared to periods of high short-term rates.