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Shadow banking and the financial side of financialization

Shadow banking and the financial side of financialization

Caverzasi, Eugenio, Botta, Alberto and Capelli, Clara (2019) Shadow banking and the financial side of financialization. Cambridge Journal of Economics, 43 (4). pp. 1029-1051. ISSN 0309-166X (Print), 1464-3545 (Online) (doi:https://doi.org/10.1093/cje/bez020)

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Abstract

This paper tries to shed some light on the nature and functioning of shadow banking, with a special focus on its role in the evolution of financialization as well as in sharpening income and wealth inequality. On the one hand, it discusses how securitization has allowed traditional banks to expand their business, providing the financial system with the “raw materials” for the manufacturing of complex structured financial products. On the other hand, it questions the view of traditional and shadow banks as two parallel and alternative systems, claiming that financialization did not alter the role of commercial banks as money creators, but rather diverted endogenously created money to the financial sphere, feeding its expansion. Finally, our work discusses some policy options for the de-financialization of the economy through more progressive taxation of the financial sector, as well as a stronger engagement to reduce income and wealth inequality.

Item Type: Article
Uncontrolled Keywords: shadow banking, de-financialization
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 31 Jul 2019 11:00
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: GREAT 2
URI: http://gala.gre.ac.uk/id/eprint/22986

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