Sustainable Shadow Banking

Guillermo Ordonez

No 19022, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Commercial banks are subject to regulation that restricts their investments. When banks are concerned for their reputation, however, they could self-regulate and invest more efficiently. Hence, a shadow banking that arises to avoid regulation has the potential to improve welfare. Still, reputation concerns depend on future economic prospects and may suddenly disappear, generating a collapse of shadow banking and a return to traditional banking, with a decline in welfare. I discuss how a combination of traditional regulation and cross reputation subsidization may enhance shadow banking and make it more sustainable.

JEL-codes: D82 E44 G01 G18 G21 (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-ban
Note: EFG LE ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published as Guillermo Ordoñez, 2018. "Sustainable Shadow Banking," American Economic Journal: Macroeconomics, vol 10(1), pages 33-56.

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Journal Article: Sustainable Shadow Banking (2018)
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