Shadow banks and macroeconomic instability
Benjamin Nelson () and
CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University
We develop a macroeconomic model in which commercial banks can offload risky loans to a ‘shadow’ banking sector, and financial intermediaries trade in securitized assets. We analyze 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, stabilization policy aimed solely at the securitization markets is relatively ineffective.
Pages: 61 pages
New Economics Papers: this item is included in nep-ban, nep-dge and nep-mac
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Journal Article: Shadow Banks and Macroeconomic Instability (2017)
Working Paper: Shadow banks and macroeconomic instability (2014)
Working Paper: Shadow banks and macroeconomic instability (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2013-78
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