Relationship Banking, Shadow Banking, and the Economics of Depression

Bianco, Antonio (2015): Relationship Banking, Shadow Banking, and the Economics of Depression.

Abstract

A stock-flow consistent and simple methodological account of the influence of financial markets over the real economy is here presented. Based on an original interpretation of the basic heterogeneity in relationship and shadow banking operations, often referred to as OTH vs. OTD banking models, this methodological article develops an accounting model that emphasizes the interdependencies in entrepreneurs’ variations in animal spirits, financial institutions’ liquidity risk management, and households’ effective demand. The model captures the idea that fluctuations in the composition of property incomes lead to fluctuations in borrowing for non-financial purposes that, in their turn, drive fluctuations in spending. The model is so devised as to allow a tidy comparison in the role played by relationship or shadow banking over the dynamism of a depressed economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: depression, animal spirits, liquidity preference, effective demand, post-Keynesian, endogenous money, securitization, relationship vs. shadow banking, originate-to-hold vs. originate-to-distribute
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E20 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M40 - General

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