Lost in translation? ECB's monetary impulses and financial intermediaries' responses

Non-bank (-balance sheet) based financial intermediation has become considerably more important over the last couple of decades. For the U.S., this trend has been discussed ever since the mid-1990s. As a consequence, tra
Non-bank (-balance sheet) based financial intermediation has become considerably more important over the last couple of decades. For the U.S., this trend has been discussed ever since the mid-1990s. As a consequence, traditional monetary transmission mechanisms, mainly operating through bank balance sheets, have apparently become less relevant. This in particular applies to the bank lending channel. Concurrently, recent theoretical and empirical work uncovered a "risk-taking channel" of monetary policy. This mechanism is not confined to traditional banks but has been found to operate also across the spectrum of financial intermediaries and intermediation devices, including securitization and collateralized lending/borrowing. In addition, recent empirical evidence suggests that the increasing importance of shadow-banking activities might have given rise to a so-called "waterbed effect". This is a mediating mechanisms, dampening or counteracting typically to be expected reactions to monetary policy impulses. Employing flow-of-funds data, we can document also for the Euro Area that a trend towards non-bank (not necessarily more 'market'-based) intermediation has occurred. This is, however, a fairly recent development, substantially weaker than in the U.S. Nonetheless, analyzing the response of Euro Area bank and nonbank financial intermediaries to monetary policy impulses, we find some notable behavioral differences between mainly deposit-funded and more 'market'-based financial intermediaries. We also detect, inter alia, the existence of a (still) fairly weak, but potentially policyrelevant, "waterbed" effect.
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Metadaten
Author:Günter Beck, Hans-Helmut Kotz, Natalia Zabelina
URN:urn:nbn:de:hebis:30:3-400607
URL:http://safe-frankfurt.de/de/policy-center/publikationen/detailsview/publicationname/lost-in-translation-ecbs-monetary-impulses-and-financial-intermediaries-responses.html
Parent Title (English):SAFE white paper series, 36
Series (Serial Number):SAFE white paper series (36)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Date of Publication (online):2016/04/29
Date of first Publication:2016/04/29
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/05/10
Tag:credit channel; interest-rate channel; market-based financial intermediation; monetary transmission mechanism; non-bank financial intermediation; risk-taking channel of monetary policy; waterbed effect
Edition:This draft: April 27, 2016
Pagenumber:38
HeBIS PPN:381007073
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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