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Nonbank Finance and Monetary Policy Transmission in Asia

Author

Listed:
  • Beirne, John

    (Asian Development Bank Institute)

  • Renzhi, Nuobu

    (Asian Development Bank Institute)

  • Volz, Ulrich

    (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.

Suggested Citation

  • Beirne, John & Renzhi, Nuobu & Volz, Ulrich, 2022. "Nonbank Finance and Monetary Policy Transmission in Asia," ADBI Working Papers 1303, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:1303
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    More about this item

    Keywords

    nonbank finance; fintech; monetary policy; Asia;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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