A Model of Shadow Banking

Nicola Gennaioli, Andrei Shleifer and Robert W. Vishny

Scholarly Articles from Harvard University Department of Economics

Abstract: We present a model of shadow banking in which banks originate and trade loans, assemble them into diversified portfolios, and finance these portfolios externally with riskless debt. In this model: outside investor wealth drives the demand for riskless debt and indirectly for securitization, bank assets and leverage move together, banks become interconnected through markets, and banks increase their exposure to systematic risk as they reduce idiosyncratic risk through diversification. The shadow banking system is stable and welfare improving under rational expectations, but vulnerable to crises and liquidity dry-ups when investors ignore tail risks.

Date: 2013
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (218)

Published in The Journal of Finance

Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/11688792/87077864.pdf (application/pdf)

Related works:
Working Paper: A Model of Shadow Banking (2015)
Journal Article: A Model of Shadow Banking (2013)
Working Paper: A Model of Shadow Banking (2012)
Working Paper: A model of shadow banking (2012)
Working Paper: A Model of Shadow Banking (2011)
Working Paper: A Model of Shadow Banking
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:11688792

Access Statistics for this paper

More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().