Research on Chinese shadow banking’s influence and its shocks on financial markets
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| Title | Research on Chinese shadow banking’s influence and its shocks on financial markets
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| Author | Chen Hong, Yang Chengyu and Yu Pei |
| Organization | Economics and Management School, Wuhan University; School of International trade and economics, University of International Business and Economics |
| Email | chanhans@126.com；chengyu.yang@hotmail.fr；peguyvincent@hotmail.com |
| Key Words | Shadow Banking; Definition; Scale Calculation; Influence; Supervision Countermeasure |
| Abstract | This paper discusses the definition of shadow banking and its scale evaluation in China. By adopting the DEA/AHP method, which is used for evaluating the influence weight of subdivisions, this paper draws the conclusion that non-bank financial institutions have the greatest influence and other types of shadow banking system have less influence. Using the data from 2003 to 2012, and conducting SVAR model, this paper examines empirically the shocks of the expanding scales of shadow banking on financial markets in China. From the perspective of short-term fluctuation, the expanding scale of fund corporations has significant negative impacts on the deposit market, which is one of the leading causes of “money shortage” in banks nowadays. The expansion of insurance companies has significant positive impacts on the money supply market, causing a positive fluctuation of money supply. The expansion of shadow banking system has positive or negative effects on the inter-bank lending market, but the overall impacts are weak. From the perspective of long-term equilibrium, the expanding scale of private lending strengthens its positive impacts on the deposit market and consequently, the scale of the deposit market is expanding gradually. However, the expansion of insurance companies and non-bank financial institutions inhibits the increase of the deposit market. With the strengthening negative influence of fund corporations and non-bank financial institutions, the influence of insurance companies decreases. On the whole, the expanding scale of the shadow banking system will have a long-term inhibitory effect on the money supply market. The overall scale expansion of the shadow banking system will pull the inter-bank rates to a higher level and reduce the financing ability of banks in the short term, with the non-bank financial institutions and the private lending have the greatest influence. |
| Serial Number | WP658 |
| Time | 2014-08-19 |
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