Monetary policy and macroprudential policy effects on non-bank credit: Evidence from EU countries
Title: Monetary policy and macroprudential policy effects on non-bank credit: Evidence from EU countries
Abstract: This study brings empirical evidence on how non-bank credit in EU countries is complementary to bank credit, and how it responds to foreign monetary policy and macroprudential regulation. Using local projection methods, the main findings show that in EU countries, non-bank lending faces deeper negative spillovers from foreign monetary policy shocks compared to bank lending. On the contrary, EU countries with tighter macroprudential policies face significantly smaller or no negative spillovers to bank and non-bank lending coming especially from US monetary policy tightening shocks, but also from UK and EA monetary policy tightening. Measures of a macroprudential policy nature such as capital buffers and limits to credit growth appear to be particularly effective at mitigating the spillover effects of US monetary policy to bank lending and indirectly to non-bank lending. Results indicate that domestic macroprudential policies can dampen EU countries' exposure to foreign monetary policy and may be a useful tool in the face of spillovers coming from center countries and within the EU.