Author

  • Sheunesu Zhou

    • University of Zululand, South Africa
    • South Africa

Abstract

The study provides an analysis of the relationships between shadow banking, bank liquidity and monetary policy rate in emerging economies. It is aimed at broadening knowledge on the effects of shadow banking on monetary policy transmission. Furthermore, the study seeks to analyse the impact of changes in bank liquidity on the growth of the shadow banking sector. We employ panel VAR technique to analyse the dynamics of monetary policy, shadow banking and bank liquidity using data for 15 emerging economy countries. We find that a contractionary monetary policy shock results in a decrease in shadow banking and a decrease in bank liquidity. We also find that a positive shock in bank liquidity increases shadow bank growth and a positive shock in shadow banking also increases bank liquidity. The results point to complementarity between shadow banking and bank liquidity; close interconnectedness between the two sectors; and the dominance of risk-taking in emerging economies. We suggest coordination between monetary policy and prudential regulation to improve the potency of monetary policy.

Keywords

References

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How to Cite

Zhou, S. (2020). Shadow Banking, Bank Liquidity and Monetary Policy Shocks in Emerging Economies: A Panel VAR Analysis. Journal of Economics and Behavioral Studies, 11(6(J), 46-59. https://doi.org/10.22610/jebs.v11i6(J).2970

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Section

Research Paper

Published in

Vol. 11 No. 6(J) (2019) Monetary Policy, Culture & Financial Resilience View issue contents

Published

2020-02-08

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