Citation

Discussion Paper Details

Please find the details for DP14989 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Nonbanks, Banks, and Monetary Policy: U.S. Loan-Level Evidence since the 1990s

Author(s): David Elliott, Ralf Meisenzahl, José Luis Peydró and Bryce C. Turner

Publication Date: July 2020

Keyword(s): consumer loans, monetary policy, Mortgages, Nonbank lending, Shadow banks and syndicated loans

Programme Area(s): Monetary Economics and Fluctuations

Abstract: We show that credit supply effects and associated real effects of monetary policy depend on the size of nonbank presence in the respective lending market. Nonbank presence also alters how monetary policy affects the distribution of risk. For identification, we use exhaustive loan-level data since the 1990s and Gertler-Karadi (2015) monetary policy shocks. First, different from the literature showing that low monetary policy rates increase credit supply and risk-taking by banks, we find that higher monetary policy rates shifts credit supply for corporates, mortgages, and consumers shifts from regulated banks to less regulated, more fragile nonbanks. Moreover, this shift is more pronounced for ex-ante riskier borrowers. Second, nonbanks reduce the effectiveness of the bank lending channel of monetary policy at the loan-level. However, this reduction varies substantially across lending markets. Total credit and real effects are largely neutralized in consumer loans and the associated consumption, but not in corporate loans and investment.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14989

Bibliographic Reference

Elliott, D, Meisenzahl, R, Peydró, J and Turner, B. 2020. 'Nonbanks, Banks, and Monetary Policy: U.S. Loan-Level Evidence since the 1990s'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14989