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We explore the effect of political party alignment on the likelihood of undertaking charitable behaviour, as captured by making monetary donations and volunteering, as well as on the amount of money donated and the number of hours volunteered. Using data from the most recent large scale UK household longitudinal survey, this is one of the first studies to explore the relationship between political affiliation and charitable behaviour using panel data. Being affiliated to the Labour Party relative to being affiliated to the Conservative Party (the most right wing political party in our analysis) is negatively associated with both the probability of donating money to charity and the proportion of income donated to charity. In contrast, these effects are found to be positive in the case of the Liberal Democrats and the Green Party. With respect to volunteering, we find that, whilst affiliations with the Labour Party and the Liberal Democrats relative to being affiliated to the Conservative Party are negatively associated with the probability of being a volunteer, affiliations with the Labour Party and the Liberal Democrats are positively associated with the number of hours volunteered conditional on being a volunteer.

We explore the empirical relationship between borrowing constraints and household financial portfolio allocation. To motivate our analysis we develop a mean-variance model of portfolio allocation with three tradable asset classes defined by increasing risk, and establish a link between borrowing restrictions and financial portfolio allocation at the household level. Under non-restrictive assumptions the proportion of wealth allocated to the medium-risk asset is ambiguous. We also demonstrate that in the presence of both correlated background risk and borrowing constraints the domain of the non-binding risk-return space will be a function of background risk. We then analyse the US Survey of Consumer Finances with a view to empirically exploring the predictions of our theoretical framework. The distribution of medium-risk assets in US households is remarkably similar to that for high-risk assets, and suggests the presence of a more general ‘risk puzzle’, which our proxies for borrowing constraints partially explain. Our findings indicate that such constraints are inversely related to the proportion of financial wealth allocated to both high-risk and medium-risk assets, but are positively related to low-risk asset holdings. In light of our findings, further work aimed at accounting for the allocation of medium-risk assets in US households is considered expedient.

Using a panel of large U.S. banks, we examine banks' risk‐taking behaviour in response to monetary policy shocks. Our investigation provides support for the presence of a risk‐taking channel: banks' non‐performing loans increase in the medium to long‐run following an expansionary monetary policy shock. We also find that banks' capital structure plays an important role in explaining bank's risk‐taking appetite. Impulse response analysis shows that shocks emanating from larger banks spill over to the rest of the sector but no such effect is observed for smaller banks. These findings are confirmed for banks' Z‐score.