The Macroeconomics of Shadow Banking

Moreira, Alan; Savov, Alexi

doi:10.1111/jofi.12540

Cited by 192 publications

(39 citation statements)

References 109 publications

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“…In boom years, the SBS transforms risky assets into short-term money-like instruments held by households, fi rms and institutional investors. However, liquidity and credit conditions sharply contract in the burst period (Moreira and Savov, 2017). Also, since the SBS off ers an alternative source of funding to the real economy, we may expect that some portion of the additional demand for money will be satisfi ed by shadow banking entities.…”

Section: Resultsmentioning

confidence: 99%

Placing the Czech Shadow Banking Sector under the Light

Hodula¹,

Macháček²,

Melecky³

2020

Prague Economic Papers

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The size of the shadow banking sector (SBS) has more than doubled in the Czech Republic over the last decade. This places a potential burden on policy makers. On the one hand, the SBS complements regular banking by expanding access to credit and investments, enabling better risk sharing and maturity transformation, and supporting market liquidity. On the other hand, SBS activities can put the stability of the financial system at risk and amplify its procyclicality by exacerbating the buildup of leverage and asset price bubbles. We implement a FAVAR model of the Czech economy to determine the impact of macroeconomic factors on the SBS. We find that the SBS: (i) is sensitive to changes in market interest rates and term spread; (ii) exhibits great procyclicality; (iii) can act as a complement to regular banking and satisfy some additional demand for credit. We also define some potential risks of continued growth of the SBS, linked to our empirical evidence.

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Section: Resultsmentioning

confidence: 99%

Placing the Czech Shadow Banking Sector under the Light

Hodula¹,

Macháček²,

Melecky³

2020

Prague Economic Papers

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“…Since the Chinese-style shadow banking is affiliated to the commercial banks, analysis of shadow banking's risk transmission mechanism and the issue of how shadow banking causes systemic risks requires analysing the monetary policy transmission effects on the traditional commercial banks. Moreira and Savov (2017) pointed out that shadow banking securitization products during the boom period are effective tools to supplement market liquidity, but it will exacerbate negative economic volatility when facing uncertain factors. Yang et al (2019) found that the coordination of monetary policy and macro-prudential policies in China through the frontier analysis of effective policies is conducive to stabilizing the economy while reducing the relative scale of shadow banking.…”

Section: Literature Reviewmentioning

confidence: 99%

Shadow banking, monetary policy and systemic risk

2020

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This article aims to analyse the dissimilation effect of shadow banking on monetary policy and to judge the cyclical characteristics of shadow banking. Further, we analyse the dynamic response of shadow banking to financial risk shocks and regulatory shocks, and examine the influence of shadow banking on the transmission path of systemic risks, so as to provide theoretical bases for financial supply-side structural reforms in the context of high-quality development. To this end, this article constructs the multi-sector DSGE model that includes the shadow banking sector and the commercial banking sector that subjects to multiple credit regulatory constraints. And then the five-variable VAR model is used to conduct empirical tests. Empirical research has found that Chinese-style shadow banking exhibits countercyclical characteristics, and the existence of shadow banking reduces the transmission effectiveness of credit channel. Numerical simulation analysis finds that positive interest rate shocks would trigger the expansion of shadow banks and increase leverage, while reducing the credit leverage of commercial banks. Technological impacts such as financial technology have reduced loan premiums and have played a role in multi-channel evacuation of risk accumulation from the perspective of inclusive finance.

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“…As we all know, economic fluctuation has an impact on the banking system [50]. To better explore the shock of macroeconomic fluctuation on the banking system with shadow banking (U = 100 and V = 300), we added the traditional banking system for comparison (U = 400 and V = 0).…”

Section: The Shock Of Macroeconomic Fluctuation On the Stability Of Tmentioning

confidence: 99%

Research on the Stability of the Banking System With Shadow Banking Under Macroeconomic Fluctuation

Pan

Fan

2020

Front. Phys.

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In recent years, shadow banking is considered to be one of the important factors that cause the financial crisis and destroy the stability of the banking system. However, in fact, macroeconomic fluctuation is closely related to the stability of the banking system. As an indispensable part of the decision-making of shadow banking, the shock of macroeconomic fluctuation plays a vital role as well. Therefore, based on the agent-based method in modern complex network theory, a model of a dynamic complex interbank network with shadow banking under macroeconomic fluctuation is proposed in this paper, in which the shock of macroeconomic fluctuation on the stability of the banking system with shadow banking and the effect of the shadow banking on the macroeconomic fluctuation are explored. The results show that in the boom, the liquidity of the banking system is expanded, the average bank profits are improved, the investment opportunities are increased, the survival bank ratio is high, and the systemic risk is low. The banking system stability is increased. While in the stable and the bust, the liquidity of the banking system is declined, average bank profits are shrunk, investment opportunities are gradually disappeared, and the survival bank ratio is decreased. Shadow banking starts to collapse, the systemic risk breaks out, and the banking system stability is seriously damaged. Furthermore, by analyzing the influence of shadow banking on the macroeconomic fluctuation, we find that shadow banking builds up the fragility of macroeconomic performance, and without external regulation, this impact is irreversible. This paper sheds light on the impact of macroeconomic fluctuation on the stability of the banking system with shadow banking, shows the risk problems brought by shadow banking for economic fluctuation, refines research of the banking system stability, and offers effective theoretical references for decision-makers and regulators.

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The Macroeconomics of Shadow Banking

Cited by 192 publications

References 109 publications

Placing the Czech Shadow Banking Sector under the Light

Placing the Czech Shadow Banking Sector under the Light

Shadow banking, monetary policy and systemic risk

Research on the Stability of the Banking System With Shadow Banking Under Macroeconomic Fluctuation

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