• Print
  • Email

Working Papers, No. 2023-29, August 2023 Crossref
Nonbank Lenders as Global Shock Absorbers: Evidence from US Monetary Policy Spillovers

We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. We exploit loan-level data from the global syndicated lending market and US monetary policy surprises. When US policy tightens, nonbanks increase dollar credit supply to non-US firms (relative to banks), mitigating the dollar credit reduction. This increase is stronger for riskier firms, proxied by emerging market firms, high-yield firms, or firms in countries with stronger capital inflow restrictions. However, firm-lender matching, zombie lending, fragile-nonbank lending, or periods of low vs higher local GDP growth do not drive these results. Furthermore, the substitution from bank to nonbank credit has firm-level real effects. Consistent with a funding-based mechanism, when US monetary policy tightens, non-US nonbanks increase short-term dollar debt funding, relative to banks. In sum, despite increased risk-taking by less regulated and more fragile nonbanks (relative to banks), access to nonbank credit reduces the volatility in capital flows—and associated economic activity—stemming from US monetary policy spillovers, with important implications for theory and policy.


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.

Having trouble accessing something on this page? Please send us an email and we will get back to you as quickly as we can.

Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, Illinois 60604-1413, USA. Tel. (312) 322-5322

Copyright © 2024. All rights reserved.

Please review our Privacy Policy | Legal Notices