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Shadow banking and the financial side of financialisation

Author

Listed:
  • Eugenio Caverzasi
  • Alberto Botta
  • Clara Capelli

Abstract

This paper sheds some light on the nature and functioning of shadow banking, with a special focus on its role in the evolution of financialisation as well as in sharpening income and wealth inequality. On the one hand, it discusses how securitisation has allowed traditional banks to expand their business, providing the financial system with the ‘raw materials’ for the manufacturing of complex structured financial products. On the other hand, it questions the view of traditional and shadow banks as two parallel and alternative systems, claiming that financialisation did not alter the role of commercial banks as money creators, but rather diverted endogenously created money to the financial sphere, feeding its expansion. Finally, our work discusses some policy options for the de-financialisation of the economy through more progressive taxation of the financial sector, as well as a stronger engagement to reduce income and wealth inequality.

Suggested Citation

  • Eugenio Caverzasi & Alberto Botta & Clara Capelli, 2019. "Shadow banking and the financial side of financialisation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(4), pages 1029-1051.
    • Handle: RePEc:oup:cambje:v:43:y:2019:i:4:p:1029-1051.
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    File URL: http://hdl.handle.net/10.1093/cje/bez020
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    Citations

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    Cited by:

    1. Daniele Tori & Eugenio Caverzasi & Mauro Gallegati, 2023. "Financial production and the subprime mortgage crisis," Journal of Evolutionary Economics, Springer, vol. 33(2), pages 573-603, April.
    2. Botta, Alberto & Caverzasi, Eugenio & Russo, Alberto & Gallegati, Mauro & Stiglitz, Joseph E., 2021. "Inequality and finance in a rent economy," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 998-1029.
    3. Simon Schairer, 2024. "The contradictions of unconventional monetary policy as a post-2008 thwarting mechanism: financial dominance, shadow banking, and inequality," Review of Evolutionary Political Economy, Springer, vol. 5(1), pages 1-29, June.
    4. Botta, Alberto & Caverzasi, Eugenio & Russo, Alberto, 2022. "When complexity meets finance: A contribution to the study of the macroeconomic effects of complex financial systems," Research Policy, Elsevier, vol. 51(8).
    5. Lorenzo Nalin & Giuliano Toshiro Yajima, 2021. "Commodities fluctuations, cross border flows and financial innovation: A stock‐flow analysis," Metroeconomica, Wiley Blackwell, vol. 72(3), pages 539-579, July.
    6. Botta, Alberto & Caverzasi, Eugenio & Russo, Alberto, 2024. "Same old song: On the macroeconomic and distributional effects of leaving a Low Interest Rate Environment," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 552-570.
    7. Murau, Steffen & Haas, Armin & Guter-Sandu, Andrei, 2022. "Monetary Architecture and the Green Transition," SocArXiv sw5tu, Center for Open Science.
    8. Steffen Murau & Armin Haas & Andrei Guter-Sandu, 2024. "Monetary architecture and the Green Transition," Environment and Planning A, , vol. 56(2), pages 382-401, March.
    9. Lysandrou, Photis & Shabani, Mimoza & D’Avino, Carmela, 2022. "The explosive growth of the US ABCP market between 2004 and 2007: An integrated empirical analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 31-46.

    More about this item

    Keywords

    Financialisation; Commodification; Shadow banking; Securitisation;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General

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