Shadow banking changes macro-prudential trade-offs – BdF paper

The Banque de France

The shadow banking sector has a major impact on macro-prudential policy, a working paper published by the Banque de France finds.

In Welfare-based optimal macro-prudential policy with shadow banks, Stefan Gebauer presents a dynamic stochastic general equilibrium model for the eurozone. The model simulates a financial sector where credit can leak towards unregulated non-bank financial institutions.  

The presence of NBFIs, or “shadow banks”, raises the importance of credit stabilisation for

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