Money Creation and the Shadow Banking System

@inproceedings{Sunderam2015MoneyCA,
  title={Money Creation and the Shadow Banking System},
  author={Aditya V. Sunderam},
  year={2015}
}
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… CONTINUE READING

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