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Financial Stability Policies for Shadow Banking

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  • Adrian, Tobias

Abstract

This paper explores financial stability policies for the shadow banking system. I tie policy options to economic mechanisms for shadow banking that have been documented in the literature. I then illustrate the role of shadow bank policies using three examples: agency mortgage real estate investment trusts, leveraged lending, and captive reinsurance affiliates. For each example, the economic mechanisms are explained, the potential risks emanating from the activities are described, and policy options to mitigate such risks are listed. The overarching theme of the analysis is that any policy prescription for the shadow banking system is highly specific relative to the particular activity.

Suggested Citation

  • Adrian, Tobias, 2015. "Financial Stability Policies for Shadow Banking," CEPR Discussion Papers 10435, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10435
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    References listed on IDEAS

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    1. Nicola Gennaioli & Andrei Shleifer & Robert W. Vishny, 2013. "A Model of Shadow Banking," Journal of Finance, American Finance Association, vol. 68(4), pages 1331-1363, August.
    2. Tobias Adrian & Adam B. Ashcraft, 2012. "shadow banking: a review of the literature," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
    3. Jeremy C. Stein, 2012. "Monetary Policy as Financial Stability Regulation," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 57-95.
    4. Adrian, Tobias & Ashcraft, Adam B. & Cetorelli, Nicola, 2013. "Shadow bank monitoring," Staff Reports 638, Federal Reserve Bank of New York.
    5. Robin Greenwood & Samuel Hanson & Jeremy C. Stein, 2010. "A Gap‐Filling Theory of Corporate Debt Maturity Choice," Journal of Finance, American Finance Association, vol. 65(3), pages 993-1028, June.
    6. Antoine Martin & David Skeie & Ernst-Ludwig von Thadden, 2014. "Repo Runs," Review of Financial Studies, Society for Financial Studies, vol. 27(4), pages 957-989.
    7. Joshua H. Gallin, 2013. "Shadow banking and the funding of the nonfinancial sector," Finance and Economics Discussion Series 2013-50, Board of Governors of the Federal Reserve System (US).
    8. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    9. Emmanuel Farhi & Jean Tirole, 2012. "Collective Moral Hazard, Maturity Mismatch, and Systemic Bailouts," American Economic Review, American Economic Association, vol. 102(1), pages 60-93, February.
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    Cited by:

    1. Tobias Adrian & Nellie Liang, 2018. "Monetary Policy, Financial Conditions, and Financial Stability," International Journal of Central Banking, International Journal of Central Banking, vol. 14(1), pages 73-131, January.
    2. Janko Cizel & Jon Frost & Aerdt Houben & Peter Wierts, 2019. "Effective Macroprudential Policy: Cross‐Sector Substitution from Price and Quantity Measures," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(5), pages 1209-1235, August.
    3. repec:eee:finsta:v:36:y:2018:i:c:p:159-186 is not listed on IDEAS
    4. repec:taf:rripxx:v:24:y:2017:i:5:p:802-838 is not listed on IDEAS

    More about this item

    Keywords

    financial intermediation; shadow bank policies; systemic risk;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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