TITLE:
Effect of Confidence Shock on an Economy with a Shadow Banking System: Analysis Based on Dynamic Stochastic General Equilibrium Model
AUTHORS:
He Cong, Yang Chen
KEYWORDS:
Shadow Banking, Optimism, Dynamic Stochastic General Equilibrium Model, Confidence Shock
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.15,
November
21,
2018
ABSTRACT: We introduced a financial intermediary system
including shadow banks into a New-Keynesian dynamic stochastic general
equilibrium framework and analyzed the effect of confidence on the real
economy. A model simulation indicated that confidence boosts growth and promotes
consumption and investment in the real economy. The effects on the shadow
banking system and traditional commercial banking system differed, thereby
providing a new perspective for policy-making and economic structure model
research.