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Drivers of Shadow Banking System: A Panel Empirical Approach for Developed Countries

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  • Sarah Goldman
  • Virginia Zhelyazkova

Abstract

In the current paper, we aim to examine the Shadow Banking System (SBS) in a number of developed countries, more precisely nine countries from Europe and the United States for the period 2002-2018. The goal is to define which are the key determinants that drive the SB processes. To this end, we run simple robust panel estimations. As a result of this analysis, we have reached a number of conclusions: 1/ the roles of banks, insurance companies and pension funds are important, 2/ changes in banking variables, such as the capital ratios, lead to an increase in shadow banking activity, 3/ there is a negative relation between banking interest margins and shadow banks, and 4/ developments on the stock market affect shadow banking positively. However, given the limitations in terms of data size and evolving definitions, our findings are not generalizable. Our main recommendation is to develop a more granular and reliable approach to improve the quality of empirical research and reduce the literature gap.

Suggested Citation

  • Sarah Goldman & Virginia Zhelyazkova, 2023. "Drivers of Shadow Banking System: A Panel Empirical Approach for Developed Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 95-122.
    • Handle: RePEc:bas:econst:y:2023:i:8:p:95-122
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    References listed on IDEAS

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services

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