Abstract
We show that nonbanks (funds, shadow banks, fintech) reduce the effectiveness of tighter monetary policy on credit supply and the resulting real effects, and increase risk-taking. For identification, we exploit exhaustive US loan-level data since 1990s and Gertler-Karadi monetary policy shocks. Higher policy rates shift credit supply from banks to less-regulated, more fragile nonbanks. The bank-to-nonbank shift largely neutralizes total credit and associated consumption effects for consumer loans and attenuates the response of total corporate credit ( firm investment) and mortgages (house price spillovers). Moreover, different from the so-called risk-taking channel, higher policy rates imply more risk-taking by nonbanks.
