Shadow banking: Economics and policy priorities
Stijn Claessens, Zoltan Pozsar, Lev Ratnovski, Manmohan Singh 12 January 2013
The risks associated with shadow banking are at the forefront of the regulatory debate. Yet, this column argues that there is as yet no established analytical approach to shadow banking. This means that policy priorities are not clearly motivated. But if we analyse securitisation and collateral intermediation – the two shadow banking functions most important for financial stability – a solid framework that includes existing policy recommendations, as well as some alternative ones, begins to emerge.
This column is a lead commentary in the VoxEU Debate "Banking reform: Do we know what has to be done?"
securitisation, financial deregulation, shadow banking, collateral intermediation
The policy roots of finance
Giuseppe Bertola, Anna Lo Prete 20 May 2010
Financial interconnectedness across countries has reached unprecedented levels – but what has driven this change? This column finds that financial deregulation is responsible for 16 percentage points of the increase in financial development, but openness to trade and the size of government off-set one another. This is because the structural association between trade openness and financial development is mildly negative.
Finance boomed for quite some time. And then it crashed. To understand what might happen as the world begins to emerge from the crisis, we need to try and understand where finance came from. At the global level, finance grew along with international economic integration at the turn of this century, as well as at the beginning of the 20th century.
Global economy International finance
financial development, openness, financial deregulation