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What drives the shadow banking system in the short and long run?

Author

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  • Duca, John V.

    (Federal Reserve Bank of Dallas)

Abstract

This paper analyzes how risk and other factors altered the relative use of short-term business debt funded by the shadow banking system since the early 1960s. Results indicate that the share was affected over the long-run not only by changing information and reserve requirement costs, but also by shifts in the impact of regulations on bank versus nonbank credit sources—such as Basel I in 1990 and reregulation in 2010. In the short-run, the shadow share rose when deposit interest rate ceilings were binding, the economic outlook improved, or risk premia declined, and fell when event risks disrupted financial markets.

Suggested Citation

  • Duca, John V., 2014. "What drives the shadow banking system in the short and long run?," Working Papers 1401, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddwp:1401
    DOI: 10.24149/wp1401
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    File URL: http://www.dallasfed.org/assets/documents/research/papers/2014/wp1401.pdf
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    References listed on IDEAS

    as
    1. Richard G. Anderson & Charles S. Gascon, 2009. "The commercial paper market, the Fed, and the 2007-2009 financial crisis," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 589-612.
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    4. John V. Duca & Tao Wu, 2009. "Regulation and the Neo-Wicksellian Approach to Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 799-807, June.
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    6. John V. Duca, 1999. "What credit market indicators tell us," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 2-13.
    7. Jaffee, Dwight M., 1975. "Cyclical variations in the risk structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 1(3), pages 309-325, July.
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    Citations

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    Cited by:

    1. repec:eee:dyncon:v:81:y:2017:i:c:p:32-49 is not listed on IDEAS
    2. Anderson, Richard G. & Bordo, Michael & Duca, John V., 2017. "Money and velocity during financial crises: From the great depression to the great recession," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 32-49.
    3. Duca, John V., 2013. "Did the commercial paper funding facility prevent a Great Depression style money market meltdown?," Journal of Financial Stability, Elsevier, vol. 9(4), pages 747-758.
    4. repec:eee:intfin:v:50:y:2017:i:c:p:69-84 is not listed on IDEAS
    5. Teodora Cristina Barbu & Iustina Alina Boitan & Sorin Iulian Cioaca, 2016. "Macroeconomic Determinants Of Shadow Banking – Evidence From Eu Countries," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 11-129, December.
    6. SungJun Kim, 2017. "What drives shadow banking? A dynamic panel evidence," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Statistical implications of the new financial landscape, volume 43 Bank for International Settlements.
    7. Li, Xuelian & Lin, Jyh-Horng, 2016. "Shadow-banking entrusted loan management, deposit insurance premium, and capital regulation," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 98-109.

    More about this item

    Keywords

    shadow banking; regulation; financial frictions; credit rationing;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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