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Working Paper, No. 2022-27, June 2022 Crossref
Nonbanks, Banks, and Monetary Policy: U.S. Loan-Level Evidence since the 1990s

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, fragile nonbanks—in all credit markets—expand supply to riskier borrowers.


Working papers are not edited, and all opinions and errors are the responsibility of the author(s). The views expressed do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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