Nonbanks, Banks, and Monetary Policy: U.S. Loan-Level Evidence Since the 1990s
CEPR Discussion Paper No. DP14989
73 Pages Posted: 28 Jul 2020 Last revised: 22 Sep 2021
Date Written: July 2020
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, borrower-lender 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, different from the risk-taking channel, higher policy rates increase risk-taking, as less-regulated, more fragile nonbanks -in all credit markets- expand supply, especially to riskier borrowers.
Keywords: banks, Credit and Risk-Taking Channel, Household and Corporate Loans, monetary policy transmission, Nonbank Intermediaries
JEL Classification: E51, E52, G21, G23, G28
Suggested Citation: Suggested Citation
Bryce C. Turner
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
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Nonbanks, Banks, and Monetary Policy: U.S. Loan-Level Evidence Since the 1990s
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