Designing and Explaining the Assessment Model of Banks' Risk-taking from the Conditions of Monetary Policy Uncertainty

Subject Areas : Islamic finance

Nafiseh Vatanchi ¹ , Mirfeiz Fallahshams Lialestanis Lialestani ^{2 *} , Gholamreza Zomorodian ³

1 - Department of Financial, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
2 - Department of Financial, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
3 - Department of Financial, Central Tehran Branch, Islamic Azad University, Tehran, Iran.

Received: 2023-11-20 Accepted : 2024-09-15 Published : 2024-09-15

Keywords: Banks Risk-Taking, Monetary Policy Uncertainty,

Abstract :

Objective: The main purpose of this study is to design and explain a model for assessing banks' risk-taking behavior under monetary policy uncertainty conditions.

Research Methodology: This research is application-oriented based on its objective. To this end, the research question was analyzed using a statistical sample comprising 9 banks listed on the Tehran Stock Exchange during the period from 2011 to 2020 on an interim basis. The uncertainty of monetary policy indicators was estimated using the Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) method, and the final model was estimated using panel data methodology.

Findings: The results from the model estimation indicate that monetary policy uncertainty has a positive and significant relationship with the risk-taking behavior of the studied banks.

Originality/Scientific Value: Considering that in recent years following the 2008 financial crisis, monetary policies have affected real economic activities through a new channel called the risk-taking channel of monetary and financial sector participants, particularly banks, presenting a model based on assessing banks' risk-taking behavior under monetary policy uncertainty conditions can lead to appropriate empirical solutions for banks and national policymakers.