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

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  • Holm-Hadulla, Fédéric
  • Mazelis, Falk
  • Rast, Sebastian

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.

Suggested Citation

  • Holm-Hadulla, Fédéric & Mazelis, Falk & Rast, Sebastian, 2023. "Bank and non-bank balance sheet responses to monetary policy shocks," Economics Letters, Elsevier, vol. 222(C).
    • Handle: RePEc:eee:ecolet:v:222:y:2023:i:c:s0165176522003925
    DOI: 10.1016/j.econlet.2022.110918
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    Cited by:

    1. Helmut Franken & Alejandro Jara, 2023. "Monetary Policy Tightening and Bank Lending Standards: Evidence from the Chilean Bank Loan Survey," Working Papers Central Bank of Chile 996, Central Bank of Chile.
    2. Josef Bajzik & Jan Janku & Simona Malovana & Klara Moravcova & Ngoc Anh Ngo, 2023. "Monetary Policy Has a Long-Lasting Impact on Credit: Evidence from 91 VAR Studies," Working Papers 2023/19, Czech National Bank.

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    More about this item

    Keywords

    Monetary policy; Non-bank finance; High-frequency identification; Euro area;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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