Department of Economics and Business - Universitat Pompeu Fabra

Title:: Nonbanks, banks, and monetary policy: U.S. loan-level evidence since the 1990s
Authors:: David Elliott, Ralf R. Meisenzahl, José-Luis Peydró and B.C. Turner
Date:: March 2019 (Revised: June 2022)
Abstract:: We show that nonbanks (funds, shadow banks, fintech) affect the transmission of monetary policy to output, prices and the distribution of risk via credit supply. For identification, we exploit exhaustive US loan-level data since the 1990s, borrowerlender relationships and Gertler-Karadi monetary policy shocks. Higher policy rates shift credit supply from banks to nonbanks, thereby largely neutralizing associated consumption effects (via consumer loans), while just attenuating firm investment and house price spillovers (via corporate loans and mortgages). Moreover, dfferent from the risk-taking channel, higher policy rates increase risk-taking, as less-regulated, fragile nonbanks |in all credit markets| expand supply to riskier borrowers.
Keywords:: Negative rates, non-standard monetary policy, reach-for-yield, securities, banks.
JEL codes:: E51, E52, G21, G23, G28
Area of Research:: Macroeconomics and International Economics

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