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

Luca Agnello, Fredj Jawadi, Ricardo M. Sousa, Vitor Castro

Risultato della ricerca: Articlepeer review


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 originaleEnglish
pagine (da-a)228-247
Numero di pagine20
Stato di pubblicazionePublished - 2020

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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