Shadow banks and macroeconomic instability
We develop a macroeconomic model in which commercial banks can offload risky loans to a ‘shadow’ banking sector, and financial intermediaries trade in securitised assets. We analyse the responses of aggregate activity, credit supply and credit spreads to business cycle and financial shocks. We find that: interactions and spillover effects between financial institutions affect credit dynamics; high leverage in the shadow banking system makes the economy excessively vulnerable to aggregate disturbances; and following a financial shock, stabilisation policy aimed solely at the securitisation markets is relatively ineffective.
|Date of creation:||28 Mar 2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jose M. Berrospide & Rochelle M. Edge, 2010. "The effects of bank capital on lending: What do we know, and what does it mean?," CAMA Working Papers 2010-26, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Jose M. Berrospide & Rochelle M. Edge, 2010. "The effects of bank capital on lending: what do we know, and what does it mean?," Finance and Economics Discussion Series 2010-44, Board of Governors of the Federal Reserve System (U.S.).
- Den Haan, Wouter & Sterk, Vincent, 2009.
"The Myth of Financial Innovation and the Great Moderation,"
CEPR Discussion Papers
7507, C.E.P.R. Discussion Papers.
- Wouter J. Den Haan & Vincent Sterk, 2011. "The Myth of Financial Innovation and the Great Moderation," Economic Journal, Royal Economic Society, vol. 121(553), pages 707-739, 06.
- Tobias Adrian & Hyun Song Shin, 2008.
"Liquidity and leverage,"
328, Federal Reserve Bank of New York.
- Jose M. Berrospide & Rochelle M. Edge, 2010. "The Effects of Bank Capital on Lending: What Do We Know, and What Does It Mean?," International Journal of Central Banking, International Journal of Central Banking, vol. 6(34), pages 1-50, December.
- Guglielmo Barone & Gaia Narciso, 2013. "The effect of organized crime on public funds," Temi di discussione (Economic working papers) 916, Bank of Italy, Economic Research and International Relations Area.
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:0487. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team)
If references are entirely missing, you can add them using this form.