Risk-Taking Channel of Unconventional Monetary Policies in Bank Lending

We investigate the effects of unconventional monetary policy on bank lending, using a bank-firm loan-level matched dataset from 1999 to 2015 by extracting exogenous changes in unconventional monetary policies over the past 20 years in Japan. We find that an increase in the share of unconventional assets held by the Bank of Japan boosts lending to firms with higher credit risks from banks with lower liquidity ratios and higher risk appetites while an expansion of the monetary base does not have such effects. Furthermore, we find that interest rate cuts stimulate lending to risky firms from banks with higher leverage