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Shadow banks and the risk-taking channel of monetary policy transmission in the euro area

Arina Wischnewsky and Matthias Neuenkirch ORCID logo EMAIL logo
From the journal German Economic Review


We provide evidence for a risk-taking channel of monetary policy transmission in the euro area that works through an increase in shadow banks’ total asset growth and their risk assets ratio. Our dataset covers the period 2000Q1–2018Q3 and includes, in addition to the standard variables for real GDP growth, inflation, and the monetary policy stance, the aforementioned two indicators for the shadow banking sector. Based on vector autoregressive models for the euro area as a whole, we find a portfolio reallocation effect towards riskier assets and evidence for a general expansion of assets. Both effects last for roughly six quarters in the case of conventional monetary policy shocks, whereas for unconventional monetary policy shocks the responses are significant for two quarters only. Country-specific as well as sector-specific estimations confirm these findings for most of the euro area countries and all non-bank types, but also reveal some heterogeneity in the reaction of financial institutions.

Article note

We offer our gratitude to two anonymous referees, Yesmine Arousse, Christian Hott, Tobias Kranz, Ulrike Neyer, and participants of the Workshop on Monetary and Financial Macroeconomics in Hamburg as well as seminar participants at Heinrich-Heine-University Düsseldorf, University of Hagen, Bundeswehr University Munich, and Julius-Maximilians-University Würzburg for their helpful comments on earlier versions of the paper.


Figure A1

Macroeconomic Variables for the Euro Area.

Figure A2

Euro Area-Wide Impulse Responses: Non-Filtered Data.

Figure A3

Euro Area-Wide Impulse Responses: Alternative Monetary Policy Indicators.

Figure A4

Size of Non-Bank Financial Sectors and Maximum Responses.

Figure A5

Peak Impulse Responses for Individual Countries.

Figure A6

Size of Shadow Banking Sectors in EA Countries and Maximum Responses.


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Published Online: 2020-08-07
Published in Print: 2021-02-02

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