The growth of non-bank finance and new monetary policy tools
Apr. 16, 2020
How does the presence of “shadow banks” – non-bank, unregulated financial intermediaries – affect the ability of central banks to tackle a liquidity crisis? Adrien d’Avernas, Assistant Professor, SHOF, Quentin Vandeweyer and Matthieu Darracq Pariès, Deputy Head, Forecasting and Policy Modelling Division, ECB, recently released an ECB research bulletin, outlining the development of an asset pricing model with bank and non-bank financial institutions. A major implication of the model includes opening liquidity facilities to non-banks and purchasing illiquid assets are essential measures to tackle a liquidity crisis.
