Macroprudential regulation and leakage to the shadow banking sector

Stefan Gebauer and Falk Mazelis

European Economic Review, 2023, vol. 154, issue C

Abstract: We study the effects of macroprudential commercial bank regulation on the shadow banking sector via an estimated New Keynesian DSGE model that differentiates between monopolistically competitive commercial banks and shadow banks that rely on funding in a perfectly competitive market for investments. We find that tighter capital requirements on commercial banks increase shadow bank lending, which may have adverse financial stability effects. Coordinating macroprudential tightening with monetary easing can limit this leakage mechanism, while overall maintaining a reduction in aggregate lending. In a counterfactual analysis we compare how macroprudential policy implemented before the 2008 financial crisis would have affected business and lending cycles.

Keywords: Macroprudential policy; Monetary policy; Policy coordination; Non-bank financial institutions; Financial frictions (search for similar items in EconPapers)
JEL-codes: E32 E58 G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Macroprudential regulation and leakage to the shadow banking sector (2020)
Working Paper: Macroprudential Regulation and Leakage to the Shadow Banking Sector (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:154:y:2023:i:c:s0014292123000338

DOI: 10.1016/j.euroecorev.2023.104404

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