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Abstract

Over the last decade, interest rates in many advanced economies have been close to the zero lower bound. In some countries, central banks have even cut rates to negative. This has influenced investors’ appetite for risk and financial institutions willingness to extend loans to less credit-worthy borrowers. In the essays of this thesis, we show that the risk taking channel of monetary policy has been relevant in emerging market and private equity investments. Additionally, banking sector profitability has also been affected by the low interest rate environment. The first essay finds that international capital flows to emerging markets react differently in an environment where global interest rates are low. The second essay shows that lower rates have impacted bank profitability in Switzerland and Denmark but also finds some heterogeneity across types of banks. The third essay finds no evidence that monetary policy has a direct impact on capital raising by private equity funds but that the asset class seems to be a risk-taking channel for investors.

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