IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v25y2020i2p228-247.html
   My bibliography  Save this article

How does monetary policy respond to the dynamics of the shadow banking sector?

Author

Listed:
  • Luca Agnello
  • Vitor Castro
  • Fredj Jawadi
  • Ricardo M. Sousa

Abstract

We investigate the response of the central bank to the change in size of nonbank financial intermediaries. Using quarterly data for the United States over the period 1946:Q1‐2016Q4, we find that when faced with an increase in the asset growth of the securities' brokers and dealers and the shadow banking sector, the monetary authority reacts by raising the short‐term nominal interest rate. This response is stronger in the case of sharp variation in the size of the balance sheet of nonbank financial intermediaries. From a policy perspective, our study suggests that an extended version of the original Taylor rule—embedding both price stability and financial stability concerns—provides a good characterization of the monetary policy reaction function.

Suggested Citation

  • Luca Agnello & Vitor Castro & Fredj Jawadi & Ricardo M. Sousa, 2020. "How does monetary policy respond to the dynamics of the shadow banking sector?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 228-247, April.
    • Handle: RePEc:wly:ijfiec:v:25:y:2020:i:2:p:228-247
    DOI: 10.1002/ijfe.1748
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.1748
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.1748?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ziqin Yu & Xiang Xiao, 2022. "Shadow banking contraction and innovation efficiency of tech-based SMEs-based on the implementation of China’s New Asset Management Regulation," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(2), pages 251-275, June.
    2. Hodula, Martin & Libich, Jan, 2023. "Has monetary policy fueled the rise in shadow banking?," Economic Modelling, Elsevier, vol. 123(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:25:y:2020:i:2:p:228-247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.