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Identification of risk-taking channel of monetary policy in Cameroon
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Identification of risk-taking channel of monetary policy in Cameroon
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Journal Article
Identification of risk-taking channel of monetary policy in Cameroon
2020
Overview
The objective of this research work is to identify the risk-taking channel of monetary policy in Cameroun. The credit risk is measure by the ratio of overdue debts on gross credit. The data used are those of 6 commercial banks collected from National Credit Council (CNC), within the period 2006-2016.The model is estimated with two methods: the Dynamic Ordinary Least Square and Fully Modify Ordinary Least Square. The Results show that the Central Banks key interest rate (TIAO) negatively affects the level of overdue debts granted by commercial banks in Cameroon. However, its impact is not significant considering the hole period. Robustness check reveals that, risk-taking channel exist in Cameroon after recent financial crisis. It also appears that credit supply and inflation significantly enhance credit risk; while banking capital significantly harms credit risk. In addition, a reduction of interest rates increases banks risk-taking especially when Gross Domestic Product growth rate is feeble. Therefore, we recommend that the monetay authorities avoid practicing low key interest rates over a long period, because it is likely to increase bank risk-taking.
Publisher
Mihai Mutascu
