What drives the shadow banking system in the short and long run?
Abstract: This paper analyzes how risk and other factors altered the relative use of short-term business debt funded by the shadow banking system since the early 1960s. Results indicate that the share was affected over the long-run not only by changing information and reserve requirement costs, but also by shifts in the impact of regulations on bank versus nonbank credit sources?such as Basel I in 1990 and reregulation in 2010. In the short-run, the shadow share rose when deposit interest rate ceilings were binding, the economic outlook improved, or risk premia declined, and fell when event risks disrupted financial markets.
File format is application/pdf
Description: Full text
Provider: Federal Reserve Bank of Dallas
Part of Series: Working Papers
Publication Date: 2014-02-13
Pages: 37 pages