Title: Lights in the shadows: exploring the need for regulation in shadow banking

Authors: Marina Brogi; Valentina Lagasio

Addresses: Management Department, Faculty of Economics, Sapienza University of Rome, via del Castro Laurenziano 9, 00161 Roma, Italy ' Management Department, Faculty of Economics, Sapienza University of Rome, via del Castro Laurenziano 9, 00161 Roma, Italy

Abstract: Since the outbreak of the economic and financial crisis of 2007-2008, the shadow banking system gained attention and caused concerns among standard setters, policy makers, and academics. This research is aimed at analysing the growth of the shadow banking system and assessing whether and how shadow banking entities should be further regulated. Using an instrument-based definition we infer the need for regulation in the shadow banking system by directly investigating the time series of asset backed commercial paper (ABCP) and securitised real estate loans (SREL). By means of several advanced and refined econometric tests, we explore time series data and find a non-stationary trend. This provides support for the need to regulate shadow banking. Further policy implications are discussed in detail.

Keywords: shadow banking system; financial intermediation; asset backed commercial paper; ABCP; securitised real estate loans; SREL; time series analysis.

DOI: 10.1504/IJADS.2019.098665

International Journal of Applied Decision Sciences, 2019 Vol.12 No.2, pp.205 - 225

Available online: 15 Jan 2019 *

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