Nonbank Finance and Monetary Policy Transmission in Asia

John Beirne, Nuobu Renzhi and Ulrich Volz
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Nuobu Renzhi: Asian Development Bank Institute

No 1303, ADBI Working Papers from Asian Development Bank Institute

Abstract: Focusing on Asian economies over the period 2006 to 2019, we find that while nonbank finance appears to complement rather than substitute credit provision by the traditional banking sector, weaker regulatory quality is an important driving factor. Moreover, while we find that central bank policy rates countercyclically affect credit provision by nonbanks, impulse responses to monetary policy shocks with and without nonbank finance indicate that the effectiveness of monetary policy as a transmission channel to GDP growth, inflation, house prices, and traditional bank credit is weakened in the presence of nonbank finance. Our paper has implications for monetary policy implementation, potentially incorporating nonbanks into central bank operations and liquidity provision, as well as for financial supervisors in mitigating regulatory arbitrage.

Keywords: nonbank finance; fintech; monetary policy; Asia (search for similar items in EconPapers)
JEL-codes: E44 E50 G20 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2022-01
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
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Journal Article: Non-Bank Finance and Monetary Policy Transmission in Asia (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbiwp:1303

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