Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284070 
Year of Publication: 
2023
Series/Report no.: 
Working Paper No. WP 2023-29
Publisher: 
Federal Reserve Bank of Chicago, Chicago, IL
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.
Subjects: 
Nonbank lending
International monetary policy spillovers
Global financial cycle
Banks
US dollar funding for non-US firms
JEL: 
E5
F34
F42
G21
G23
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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