Unconventional Monetary Policy and Bank Risk Taking in Euro Area

Abstract

Central banking over the world has changed after the 2008 financial crisis. Monetary policyhas expanded the array of instruments it used in order to influence the macro economy. Majorcentral banks started using not only traditional, conventional instruments, but also some nonstandardmeasures in order to avoid economic collapse and sustain the banking system. The aim ofthis paper is to analyse the impact of European Central Bank unconventional instruments,measured using the change in its balance sheet, on the bank risk-taking of commercial banks fromEurozone, captured by Z-Score. Our findings point to an increase of bank risk-taking, due to theuse of unconventional monetary policy measures.

Keywords

• unconventional monetary policy
• bank risk-taking
• financial crisis