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Relationship Banking, Shadow Banking, and the Economics of Depression

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  • Bianco, Antonio

Abstract

A stock-flow consistent and simple methodological account of the influence of financial markets over the real economy is here presented. Based on an original interpretation of the basic heterogeneity in relationship and shadow banking operations, often referred to as OTH vs. OTD banking models, this methodological article develops an accounting model that emphasizes the interdependencies in entrepreneurs’ variations in animal spirits, financial institutions’ liquidity risk management, and households’ effective demand. The model captures the idea that fluctuations in the composition of property incomes lead to fluctuations in borrowing for non-financial purposes that, in their turn, drive fluctuations in spending. The model is so devised as to allow a tidy comparison in the role played by relationship or shadow banking over the dynamism of a depressed economy.

Suggested Citation

  • Bianco, Antonio, 2015. "Relationship Banking, Shadow Banking, and the Economics of Depression," MPRA Paper 65849, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:65849
    as

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    File URL: https://mpra.ub.uni-muenchen.de/65849/1/MPRA_paper_65849.pdf
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    References listed on IDEAS

    as
    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. Markus K. Brunnermeier & Yuliy Sannikov, 2014. "A Macroeconomic Model with a Financial Sector," American Economic Review, American Economic Association, vol. 104(2), pages 379-421, February.
    3. Bianco, Antonio, 2015. "Out of Equilibrium: Bases, Basics, Policies, and Accounts," MPRA Paper 65850, University Library of Munich, Germany.
    4. Alan Moreira & Alexi Savov, 2014. "The Macroeconomics of Shadow Banking," NBER Working Papers 20335, National Bureau of Economic Research, Inc.
    5. Suzuki, Tomo, 2003. "The epistemology of macroeconomic reality: The Keynesian Revolution from an accounting point of view," Accounting, Organizations and Society, Elsevier, vol. 28(5), pages 471-517, July.
    6. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    7. Luck, Stephan & Schempp, Paul, 2014. "Banks, shadow banking, and fragility," Working Paper Series 1726, European Central Bank.
    8. Zoltan Pozsar, 2014. "Shadow Banking: The Money View," Working Papers 14-04, Office of Financial Research, US Department of the Treasury.
    9. Arnold, Patricia J., 2009. "Global financial crisis: The challenge to accounting research," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 803-809, August.
    10. Lance Taylor, 2008. "A foxy hedgehog: Wynne Godley and macroeconomic modelling," Cambridge Journal of Economics, Oxford University Press, vol. 32(4), pages 639-663, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    depression; animal spirits; liquidity preference; effective demand; post-Keynesian; endogenous money; securitization; relationship vs. shadow banking; originate-to-hold vs. originate-to-distribute;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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