Bank and non-bank balance sheet responses to monetary policy shocks

Fédéric Holm-Hadulla, Falk Mazelis and Sebastian Rast

Economics Letters, 2023, vol. 222, issue C

Abstract: We provide evidence on how banks and non-bank financial intermediaries differ in their response to monetary policy. Our findings are based on a standard empirical macro model for the euro area, augmented with balance sheet data for banks and investment funds. The model is estimated via local projections, using high-frequency methods to identify different types of monetary policy shocks. Short-rate shocks lead to a significant balance sheet response of banks and investment funds, with a slightly swifter and more persistent reaction of banks. Long-rate shocks instead exert only short-lived effects on bank balance sheets, whereas investment fund balance sheets exhibit a stronger and more persistent response. The relative role of different types of financial intermediaries hence emerges as a relevant factor in shaping the transmission process for conventional and non-standard monetary policy measures.

Keywords: Monetary policy; Non-bank finance; High-frequency identification; Euro area (search for similar items in EconPapers)
JEL-codes: E44 E52 G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:222:y:2023:i:c:s0165176522003925

DOI: 10.1016/j.econlet.2022.110918

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