Money creation and the shadow banking system

By Adi Sunderam. 2015

192 citations recorded by the source corpus.

It is widely argued that shadow banking grew rapidly before the recent financial crisis because of rising demand for "money-like" claims. This paper assesses a key premise of this argument: that investors actually treated short-term debt issued by shadow banks as a money-like claim. I present a model where the financial sector and the central bank jointly respond to demand for money-like claims. The model generates predictions about the prices and quantities of Treasury bills, central bank reserves, and shadow bank debt. These predictions are borne out in the data, suggesting investors did treat shadow bank debt as money-like.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b9897e818e56ca5e2cb8e0a346aefc0d2bee482a

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Banks as patient fixed-income investors (2014, background): “Krishnamurthy and VissingJorgensen (2013) and Sunderam (2014) explore imperfect substitutability between different money-like claims.”
The Liquidity Premium of Near-Money Assets (2014, background): “It is also possible that part of the higher-frequency variation reflects short-lived supply effects, such as those studied by Sunderam (2013).”
Treasury inconvenience yields during the COVID-19 crisis (2020, unknown): “…, Duffee (1996) , and Longstaff (2004) , and more recent ones by Krishnamurthy and Vissing-Jorgensen (2012) , Bansal et al. (2011) , Xie (2012) , Sunderam (2014) , Nagel (2016) , Greenwood et al. (2015) , Du et al. (2018) , Fleckenstein and Longstaff (2018) , Kacperczyk et al. (2019) , Jiang…”