Shadow banks and macroeconomic instability

Roland Meeks, Benjamin Nelson and Piergiorgio Alessandri

No 487, Bank of England working papers from Bank of England

Abstract: We develop a macroeconomic model in which commercial banks can offload risky loans to a ‘shadow’ banking sector, and financial intermediaries trade in securitised assets. We analyse the responses of aggregate activity, credit supply and credit spreads to business cycle and financial shocks. We find that: interactions and spillover effects between financial institutions affect credit dynamics; high leverage in the shadow banking system makes the economy excessively vulnerable to aggregate disturbances; and following a financial shock, stabilisation policy aimed solely at the securitisation markets is relatively ineffective.

Keywords: Business fluctuations; shadow banks; credit; securitisation (search for similar items in EconPapers)
JEL-codes: E32 E50 G20 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2014-03-28
New Economics Papers: this item is included in nep-ban, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Shadow Banks and Macroeconomic Instability (2017)
Working Paper: Shadow banks and macroeconomic instability (2013)
Working Paper: Shadow banks and macroeconomic instability (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0487

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