The evolution of the U.S. financial architecture, asset prices, and the role of fiscal and monetary policy
Abstract
In the past years there has been increasing interest in shadow banking institutions.
Economists identified the shadow banking system at the core of the 2007-2008 Global
Financial Crisis and it was a key component of the transmission of fragility within the U.S.
financial system. This study explains the emergence and growth of shadow banking
institutions in the U.S. financial system and investigates the implications for monetary and
fiscal policies. While the traditional banking literature puts the burden on the bank
regulatory system implemented in the 1930s to explain the emergence of the shadow
banking system, the discussion about the coordination between monetary policy objectives
and regulatory policies designed to promote financial stability had received little or no
attention. Competition between regulated and unregulated (or less regulated) financial
institutions generated and allowed for the growth of new financial institutions (shadow
banks) that attempted to escape regulations imposed by the New Deal reform. The banking
reforms implemented in the 1930s implicitly required the coordination between monetary
policy and the regulatory framework. The relationship between the growth of shadow banks
and the relative importance of debt markets is further explored to investigate the effects of
monetary policy on financial assets.
Table of Contents
Introduction -- The structure and evolution of the U.S. financial system during the 1945-1986 period -- Liquidity preference, demand for financial assets, and monetary policy -- Liquidity trap, quantitative easing and asset prices -- Conclusion -- Appendix
Degree
Ph.D.