Belgian paper explores link between monetary policy and risk-taking
Model explores when central banks should stabilise path of real interest rate
European economists assess how monetary policy should be conducted in the presence of a risk-taking channel in a working paper published by the National Bank of Belgium – suggesting, in their model, the central bank should "seek to stabilise the path of the real interest rate".
In Monetary policy effects on bank risk-taking, Angela Abbate and Dominik Thaler tackle the problem using a New Keynesian model, operating under the assumption that interest rates can influence the risk-taking behaviour
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