The impact of shadow banks on monetary policy transmission in the Euro area

Abstract

This thesis examines the impact of shadow banks on monetary policy transmission in the Euro Area. Utilizing balance sheet data of financial intermediaries from 1999 to 2024 and employing local projection methods, the study analyzes how different financial institutions respond to monetary policy shocks. The findings indicate that shadow banks react more quickly and robustly than traditional financial institutions. This accelerated response highlights shadow banks' significant role in the monetary transmission mechanism. Consequently, policymakers must fully consider the existence of shadow banks when designing strategies to ensure effective monetary policy implementation and maintain financial stability.