Nonbank Lenders as Global Shock Absorbers: Evidence from US Monetary Policy Spillovers

David Elliott, Ralf R. Meisenzahl and Jose-Luis Peydro

No WP 2023-29, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: 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.

Keywords: nonbank lending; international monetary policy; Global financial cycle; Banks (search for similar items in EconPapers)
JEL-codes: E5 F34 F42 G21 G23 G28 (search for similar items in EconPapers)
Pages: 52
Date: 2023-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-ger, nep-inv, nep-mon and nep-opm
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Nonbank lenders as global shock absorbers: Evidence from US monetary policy spillovers (2024)
Chapter: Nonbank Lenders as Global Shock Absorbers: Evidence from US Monetary Policy Spillovers (2023)
Working Paper: Nonbank lenders as global shock absorbers: evidence from US monetary policy spillovers (2023)
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