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

See all articles by David Elliott

David Elliott

Bank of England

Ralf Meisenzahl

Federal Reserve Bank of Chicago

José-Luis Peydró

Imperial College London; Centre for Economic Policy Research (CEPR); Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Bryce C. Turner

Board of Governors of the Federal Reserve System

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

Elliott, David and Meisenzahl, Ralf and Peydro, Jose-Luis and Turner, Bryce C., Nonbanks, Banks, and Monetary Policy: U.S. Loan-Level Evidence Since the 1990s (July 2020). CEPR Discussion Paper No. DP14989, Available at SSRN: https://ssrn.com/abstract=3650103

David Elliott (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Ralf Meisenzahl

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://www.ralfmeisenzahl.com

Jose-Luis Peydro

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, Barcelona 08005
Spain
(+34) 93 542 1756 (Phone)
(+34) 93 542 1746 (Fax)

HOME PAGE: http://https://sites.google.com/site/joseluispeydroswebpage/

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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