The Macroeconomics of Shadow Banking / Alan Moreira, Alexi Savov.

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Moreira, Alan

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w20335.Publication details: Cambridge, Mass. National Bureau of Economic Research 2014.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We build a macroeconomic model that centers on liquidity transformation in the financial sector. Intermediaries maximize liquidity creation by issuing securities that are money-like in normal times but become illiquid in a crash when collateral is scarce. We call this process shadow banking. A rise in uncertainty raises demand for crash-proof liquidity, forcing intermediaries to delever and substitute toward safe, collateral- intensive liabilities. Shadow banking shrinks, causing the liquidity supply to contract, discount rates and collateral premia spike, prices and investment fall. The model produces slow recoveries, collateral runs, and flight to quality and it provides a framework for analyzing unconventional monetary policy and regulatory reform proposals.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w20335 (Browse shelf(Opens below))	Not For Loan

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July 2014.

We build a macroeconomic model that centers on liquidity transformation in the financial sector. Intermediaries maximize liquidity creation by issuing securities that are money-like in normal times but become illiquid in a crash when collateral is scarce. We call this process shadow banking. A rise in uncertainty raises demand for crash-proof liquidity, forcing intermediaries to delever and substitute toward safe, collateral- intensive liabilities. Shadow banking shrinks, causing the liquidity supply to contract, discount rates and collateral premia spike, prices and investment fall. The model produces slow recoveries, collateral runs, and flight to quality and it provides a framework for analyzing unconventional monetary policy and regulatory reform proposals.