Nonbank Lending and the Transmission of Monetary Policy

Abstract

We analyze the role of nonbank lenders in the transmission of monetary policy using data on the universe of unsecured credit to firms and households in Denmark. Nonbanks increase their credit supply after a monetary contraction, both relative to banks and in absolute terms. The increase in nonbank lending is financed through increased long-term debt. We rationalize these findings in a model with segmented debt markets where banks and nonbanks access different investor bases. Nonbank credit insulates corporate investment and household consumption from monetary contractions, with positive spillovers extending beyond direct nonbank clients through industry and geographic channels.

Keywords: Monetary Policy, Nonbanks, Shadow Banks, Banks, Credit Supply, Real Effects

JEL Classification: E51, E52, G23