Browsing by Subject "finanssisektori"

This paper constructs and analyses a variation on a DSGE model with a shadow banking system integrated in the financial sector by Falk Mazelis. Shadow banking is fundamentally described as credit intermediation outside the regular banking system and the description is specified in this paper during the process of historical review of the Chinese financial sector. Excess credit in the shadow banking sector and theoretical studies of banks’ and shadow banks different reaction to monetary policy shocks are the main motives behind this study. The Mazelis model builds upon a Gertler-Karadi DSGE model of financial intermediation with unconventional monetary policy. After mapping previous literature on banking, shadow banking and DSGE modelling the detailed model of Mazelis is adjusted by altering the monetary policy rule and four model parameters towards Chinese economical characteristics. The adjustments are and argued with data, previous literature, and theoretical arguments motivated by the historical review. The main objective of this approach is, trough the variation, to capture the effect of Chinese economical characteristics towards an economy with modelled shadow banking sector. The implications of the original model are considered as a foundation for the altered model. In the original model after tightening monetary policy, regular banks reduce the amount of loans on their balance sheet while shadow banks increase lending. This reduces the real effects of the shock, but at the same time shadow banks amplify the reaction of key variables to real shocks and can make the financial sector and the whole economy more unstable. The analysis of the altered model provides suggestions that the implemented Chinese characteristics make the economy slightly more vulnerable to a monetary policy tightening reducing capital and consumption. In addition, simulated shocks to productivity and monetary policy amplify the reactions of the financial sector in bank and shadow bank loan supply suggesting that the altered model can make the economy all the more unstable. The DSGE framework used in this paper does not try to model Chinese economy, but rather provides hints of economic elements in it and highlights specific aspects of it.