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Does central bank communication affect bank risk-taking?

This article examines whether bank risk-taking is influenced by monetary policies as well as by communication policies of a central bank. In particular, we analyse whether the signal emitted by the central bank about a likely rise (fall) in the basic interest rate for the next policy meeting and its pessimistic (optimistic) perception regarding the macroeconomic environment are responsible for inducing banks to take less (more) risks. We provide evidence for the link between monetary policies, central bank communication and bank risk-taking. The findings reveal central bank communication influences the behaviour of banks once their risk perceptions are affected.