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

In: NBER International Seminar on Macroeconomics 2023

Author

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  • David Elliott
  • Ralf R. Meisenzahl
  • José-Luis Peydró

Abstract

We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. For identification, we exploit loan‑level data from the global syndicated lending market and US monetary policy surprises. We find that when US monetary policy tightens, nonbanks increase dollar credit supply to non‑US corporate borrowers, relative to banks. This partially mitigates the total reduction in dollar lending. The substitution is stronger for emerging market borrowers, riskier borrowers, and borrowers in countries subject to stronger capital inflow restrictions. Results suggest that our findings are not driven by borrower‑lender matching, zombie lending, or destabilising lending. Moreover, the credit substitution has real effects, as firms with existing relationships with nonbank lenders increase total debt, investment, and employment relative to firms without such relationships. Our findings suggest that having more diversified funding providers (nonbanks in addition to banks) reduces the volatility in capital flows and economic activity associated with the global financial cycle.
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Suggested Citation

  • David Elliott & Ralf R. Meisenzahl & José-Luis Peydró, 2023. "Nonbank Lenders as Global Shock Absorbers: Evidence from US Monetary Policy Spillovers," NBER Chapters, in: NBER International Seminar on Macroeconomics 2023, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:15042
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    4. Mélina London & Maéva Silvestrini, 2023. "US Monetary Policy Spillovers to Emerging Markets: the Trade Credit Channel," Working papers 915, Banque de France.

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    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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