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

  • Nguyen V
  • Boateng A
  • 21

    Readers

    Mendeley users who have this article in their library.
  • 4

    Citations

    Citations of this article.

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.

Author-supplied keywords

  • Banks
  • China
  • Involuntary excess reserve
  • Monetary policy
  • Risk-taking

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Get full text

Authors

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free