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The fall in shadow banking and the slow U.S. recovery

Author

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  • Patrick Fève

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Alban Moura

    (Unknown)

  • Olivier Pierrard

    (Unknown)

Abstract

We argue that shocks to traditional and shadow banks were important drivers of the U.S. economy during the Great Recession and the Slow Recovery. This result follows from a DSGE model featuring a heterogeneous banking sector estimated from macroeconomic and financial observables. Our model attributes the Great Recession to negative shocks to the aggregate supply of loans. A more novel result is that a shock specific to shadow bank intermediation accounts for much of the Slow Recovery. Therefore, our estimates suggest that accounting for the collapse of shadow banking after the financial crisis is important to explain the subdued path of GDP, investment, and inflation several years into the recovery.

Suggested Citation

  • Patrick Fève & Alban Moura & Olivier Pierrard, 2022. "The fall in shadow banking and the slow U.S. recovery," Post-Print hal-04058856, HAL.
    • Handle: RePEc:hal:journl:hal-04058856
    DOI: 10.1016/j.jedc.2022.104404
    Note: View the original document on HAL open archive server: https://hal.science/hal-04058856v1
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