Abstract
This dissertation examines the pivotal role of financial intermediaries in mediating the effects of monetary and macroprudential policies. In the first chapter, empirical evidence highlights that commercial banks curtail lending, whereas non-bank financial intermediaries (NBFIs) augment their loan offerings in response to monetary policy contractions. The subsequent empirical analysis illustrates the disparities in market power and leverage management between these entities, as evidenced by their divergent loan-rate-setting behaviors. Specifically, NBFIs, due to their lesser market concentration, are exposed to heightened interest-rate risks, predominantly via fixed-rate loans. As a strategic response to anticipated monetary tightening, firms transition from commercial bank financing to non-bank avenues.
The second chapter introduces a quantitative DSGE model, encapsulating banks and non-banks, each characterized by distinct market power and leverage management attributes. Utilizing Bayesian estimation methods on U.S. data spanning from 1987Q1 to 2008Q4, the model elucidates the ``leakage" effect of monetary policy propagated through the non-bank sector. Counterfactual explorations reveal that an expansive non-bank sector attenuates monetary policy's impact on investments by 15%. Furthermore, a reduced market concentration for NBFIs undermines policy efficacy, particularly if accompanied by a contraction in their loan rate markup.
The final chapter delves into Basel III's application in a landscape influenced by non-banks. Post-Great Financial Crisis, Basel III pivoted to mandate heightened capital reserves for global systematically important banks (GSIBs) and introduced the counter-cyclical capital buffer (CCyB) to temper financial fluctuations. Yet, the U.S., with its prominent non-bank sector mirroring commercial banks, challenges Basel III's universality. This analysis assesses non-bank influence on the GSIB surcharge and the dynamics of CCyB within this context. Preliminary findings note a 1.14% increase in capital obligations due to the GSIB surcharge, with non-banks tempering cyclical financial effects. As non-bank presence grows, they moderate financial volatility by 20% but escalate credit leakage. The CCyB's deployment underscores a balance between credit volatility and leakage.
