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Shadow Money, Banking Competition and Stability: Evidence from China

2019年11月13日  点击:[]

间:Nov.15th (Friday), 16:15-17:30 PM

点:Room211, Shuishang Teaching Building

题:Shadow Money, Banking Competition and Stability: Evidence from China

主讲人:Yajun Xiao


We study how competition for shadow money impacts banking stability. In our model, banks compete for insured depositors and uninsured shadow money investors and default endogenously. We estimate and calibrate our model to the Chinese banking sector and we find that shadow money investors are run-prone while depositors are not. Multiple equilibria emerge and may lead to severe financial distress with large welfare losses. Negative shocks to assets underlying shadow money amplify financial fragility. Furthermore, rollover costs can cause runs on shadow money. Imposing capital requirements on shadow money improves banking stability, but the effectiveness is limited.


Yajun Xiao is an assistant professor from School of Business, University College Dublin. He earned his Ph. D in Finance from Goethe University Frankfurt. His research interests include capital structure and maturity mismatch arising from corporate financing, systemic risk in banking system, asset pricing with market frictions. His research also focuses on other topics in quantitative finance. He has published peer-reviewed papers on Review of Finance, European Financial Management, Advances in Applied Probability and Quantitative Finance, etc.


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