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Economic uncertainty and non-bank financial intermediation: Evidence from a European panel

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  • Hodula, Martin
  • Škrabić Perić, Blanka
  • Sorić, Petar

Abstract

In the paper, we measure the connection between (economic) uncertainty and dynamics of the shadow banking sector in a panel of 27 European countries spanning the 1999Q1–2021Q4 period. Our results show that the shadow banking sector growth declines heavily during stressful periods associated with a hike in market uncertainty and risk-aversion but also uncertainty related to the economic policy conduct. Results question the ability of the shadow banking sector to secure funding to the economy during less tranquil times when liquidity quickly evaporates.

Suggested Citation

  • Hodula, Martin & Škrabić Perić, Blanka & Sorić, Petar, 2023. "Economic uncertainty and non-bank financial intermediation: Evidence from a European panel," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000491
    DOI: 10.1016/j.frl.2023.103675
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    References listed on IDEAS

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    More about this item

    Keywords

    Shadow banking; Non-bank financial intermediation; Economic uncertainty; Risk aversion;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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