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Finance and Credit
 

Non-banking financial intermediation and phenomena of shadow money in modern economy

Vol. 27, Iss. 8, AUGUST 2021

Received: 27 May 2021

Received in revised form: 10 June 2021

Accepted: 24 June 2021

Available online: 30 August 2021

Subject Heading: MONETARY ACCOMMODATION

JEL Classification: E41, E42, E51, E52

Pages: 1694–1709

https://doi.org/10.24891/fc.27.8.1694

Vladimir K. BURLACHKOV Institute of Economics of Russian Academy of Sciences, Moscow, Russian Federation
vkburl@gmail.com

https://orcid.org/0000-0003-3206-1564

Subject. The article addresses the non-banking financial intermediation (shadow banking system) as it is successfully expanding nowadays both in developed countries and emerging economics.
Objectives. The study aims at conducting a comprehensive analysis of the specifics of non-banking financial intermediation, revealing its impact on economic agents’ activities, causes and consequences, and elaborating the methodological framework for effectiveness of modern monetary policy.
Methods. I employ methods of scientific abstraction, induction, deduction, synthesis, and comparative analysis.
Results. In the modern national economy, along with the money, created by the central bank and commercial banks, there are highly liquid financial instruments called shadow money. The scope of its application is shadow banking (financial intermediation) outside the banking system. The use of shadow money is caused by high demand for credit resources.
Conclusions. The high activity of shadow banking and increased turnover of shadow money resulted from a transfer to Basel standards of banking regulation in the 1990s, which affected the lending activity of commercial banks. Under these conditions, the demand for loans provided by non-bank credit and financial institutions increased. The market of non-bank credit products was formed. However, the process of lending in the shadow banking is associated with high risks and non-stability of shadow money, widely used in this sphere.

Keywords: shadow banking, shadow money, money demand, money supply, money creation

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