Abstract
We investigate the response of the central bank to the change in size of non-bank financial intermediaries. Using quarterly data for the U.S. 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 non-bank 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 characterisation of the monetary policy reaction function.
Lingua originale | English |
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pagine (da-a) | 228-247 |
Numero di pagine | 20 |
Rivista | INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS |
Volume | 25 |
Stato di pubblicazione | Published - 2020 |
All Science Journal Classification (ASJC) codes
- ???subjectarea.asjc.1400.1402???
- ???subjectarea.asjc.2000.2003???
- ???subjectarea.asjc.2000.2002???