Sustainable Shadow Banking
Commercial banks are subject to regulation that restricts their investments. When banks are concerned for their reputation, however, they could self-regulate and invest more efficiently. Hence, a shadow banking that arises to avoid regulation has the potential to improve welfare. Still, reputation concerns depend on future economic prospects and may suddenly disappear, generating a collapse of shadow banking and a return to traditional banking, with a decline in welfare. I discuss how a combination of traditional regulation and cross reputation subsidization may enhance shadow banking and make it more sustainable.
|Date of creation:||May 2013|
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|Note:||EFG LE ME|
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- Guillermo Ordonez, 2008.
"Fragility of Reputation and Clustering in Risk Taking,"
2008 Meeting Papers
441, Society for Economic Dynamics.
- Ordoñez, Guillermo L., 2013. "Fragility of reputation and clustering of risk-taking," Theoretical Economics, Econometric Society, vol. 8(3), September.
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- Andrew Atkeson & Christian Hellwig & Guillermo L. Ordonez, 2012.
"Optimal regulation in the presence of reputation concerns,"
464, Federal Reserve Bank of Minneapolis.
- Andrew Atkeson & Christian Hellwig & Guillermo Ordonez, 2012. "Optimal Regulation in the Presence of Reputation Concerns," NBER Working Papers 17898, National Bureau of Economic Research, Inc.
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- Guillermo Ordonez & Andrew Atkeson, 2009. "Optimal Regulation in the Presence of Reputation Concerns," 2009 Meeting Papers 830, Society for Economic Dynamics.
- Zoltan Pozsar & Tobias Adrian & Adam Ashcraft & Hayley Boesky, 2010.
458, Federal Reserve Bank of New York.
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