Replication data for: A Model of Endogenous Loan Quality and the Collapse of the Shadow Banking System

Principal Investigator(s): View help for Principal Investigator(s) Francesco Ferrante

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Project Citation:

Ferrante, Francesco. Replication data for: A Model of Endogenous Loan Quality and the Collapse of the Shadow Banking System. Nashville, TN: American Economic Association [publisher], 2018. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114136V1

Project Description

Summary: I develop a macroeconomic model in which banks can affect loan quality by exerting costly screening effort. Informational frictions limit the amount of external funds that banks can raise. In this framework I consider two types of financial intermediation, traditional banking and shadow banking. By pooling different loans, shadow banks achieve a higher endogenous leverage compared to traditional banks, increasing credit availability. However, shadow banks also make the financial sector more fragile, because of the lower quality of the loans they finance and because of their exposure to bank runs. In this setting unconventional monetary policy can reduce macroeconomic instability.

Scope of Project

JEL Classification:
      E32 Business Fluctuations; Cycles
      E44 Financial Markets and the Macroeconomy
      E52 Monetary Policy
      G01 Financial Crises
      G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
      G23 Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
      L25 Firm Performance: Size, Diversification, and Scope

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V1 [2019-10-12]

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