Financial crises and shadow banks: A quantitative analysis

Rottner, Matthias

doi:10.1016/j.jmoneco.2023.06.006

Cited by 11 publications

(2 citation statements)

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“…The evolution of multimodalities, rather than asymmetries, then becomes the central macroeconomic narrative for the conditional predictive distribution of GDP growth. Following Adrian et al (2021), this calls for structural macroeconomic models able to accommodate these new empirical features, such as, for example, the nonlinear dynamic stochastic general equilibrium model of Rottner (2023) that allows for excessive leverage accumulation and endogenous financial crises. Ultimately, as a nonparametric (reduced-form) modeling tool, QRs cannot discriminate between alternative structural explanations for the drivers of movements in the GDP growth density.…”

Section: Empirical Results: Revisiting the Growth-at-risk Application...mentioning

confidence: 99%

Constructing density forecasts from quantile regressions: Multimodality in macrofinancial dynamics

Mitchell,

Poon,

Zhu

2024

J of Applied Econometrics

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SummaryQuantile regression methods are increasingly used to forecast tail risks and uncertainties in macroeconomic outcomes. This paper reconsiders how to construct predictive densities from quantile regressions. We compare a popular two‐step approach that fits a specific parametric density to the quantile forecasts with a nonparametric alternative that lets the “data speak.” Simulation evidence and an application revisiting GDP growth uncertainties in the United States demonstrate the flexibility of the nonparametric approach when constructing density forecasts from both frequentist and Bayesian quantile regressions. They identify its ability to unmask deviations from symmetrical and unimodal densities. The dominant macroeconomic narrative becomes one of the evolution, over the business cycle, of multimodalities rather than asymmetries in the predictive distribution of GDP growth when conditioned on financial conditions.

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Section: Empirical Results: Revisiting the Growth-at-risk Application...mentioning

confidence: 99%

Constructing density forecasts from quantile regressions: Multimodality in macrofinancial dynamics

Mitchell,

Poon,

Zhu

2024

J of Applied Econometrics

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“…However, the concealment of relevant information to evade supervision has undermined the stability and sustainability of the financial system [14,15]. According to the Flow of Funds data in the US, shadow banks have amassed systemic risk due to excessive leverage and endogenous operational behavior, currently posing a significant impediment to the sustainable development of the financial system [16]. The pertinent shadow banking activities in European Union member states suggest a close interconnection between shadow banking and traditional financial institutions, with the expansion of shadow banking exerting a substantial influence on the stability and advancement of the financial system [17].…”

Section: Introductionmentioning

confidence: 99%

Systemic Risk Arising from Shadow Banking and Sustainable Development: A Study of Wealth Management Products in China

Pan,

Fan

2024

Sustainability

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Shadow banking is a main way for the financial market to serve the real economy today, and this process is closely related to systemic risk. This study examines the impact of shadow banking associated with sustainable development in China’s banking on systemic risk. We analyze the data obtained from a rich sample of 31 listed commercial banks in China and shadow banking represented by wealth management products (WMPs) by constructing a dynamic complex interbank network model. The results show that the risks and vulnerabilities generated by shadow banking spread out through the interbank network and cause systemic risk to increase. The effect operates through increasing the number of default banks, reducing banks’ survival rate and profit, and forcing central bank bailout funds expansion. However, it has a positive impact in terms of augmenting liquidity and enhancing investment opportunities. Furthermore, the variability in the influence of different categories of shadow banking is assessed, emphasizing that short-term shadow banking exerts a more pronounced impact on systemic risk. In addition, the heterogeneity of the shadow banking effect on different types of commercial banks is explored, revealing that local and rural commercial banks experience a more conspicuous effect compared to state-owned and joint-stock banks. Our findings highlight that improving external supervision, promoting financial internal governance, and constraining credit linkages are vital for alleviating the increase in risks in shadow banking and maintaining the sustainable development of banking.

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