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Financial Regulation and Shadow Banking

Fève, Patrick, Moura, Alban and Pierrard, Olivier (2017) Financial Regulation and Shadow Banking: A Small-Scale DSGE Perspective. TSE Working Paper, n. 17-829, Toulouse

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Official URL: http://tse-fr.eu/pub/31822

Abstract

This paper estimates a small-scale DSGE model of the US economy with interacting traditional and shadow banks. We find that shadow banks amplify the transmission of structural shocks by helping escape constraints from traditional intermediaries. We show how this leakage toward shadow entities reduces the ability of macro-prudential policies targeting traditional credit to reduce economic volatility. A counterfactual experiment suggests that a countercyclical capital buffer, if applied only to traditional banks, would have in fact amplified the boom-bust cycle associated with the financial crisis of 2007-2008. On the other hand, a broader regulation scheme targeting both traditional and shadow credit would have helped stabilize the economy.

Item Type: Monograph (Working Paper)
Sub-title: A Small-Scale DSGE Perspective
Language: English
Date: July 2017
Place of Publication: Toulouse
Uncontrolled Keywords: Shadow Banking, DSGE models, Macro-prudential Policy
JEL Classification: C32 - Time-Series Models
E32 - Business Fluctuations; Cycles
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 14 Mar 2018 13:42
Last Modified: 04 Apr 2019 04:11
["eprint_fieldname_oai_identifier" not defined]: oai:tse-fr.eu:31822
URI: http://publications.ut-capitole.fr/id/eprint/24200

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