Recently, the paper Shadow Banking, Structural Monetary Policy and Optimal Capital Regulation Policy, co-authored by Professor Chen Qiang from the Department of Econometrics, doctoral student Jiang Zeyu, and doctoral student Li Yike from the Department of Macroeconomics at the School of Economics, Shanghai University of Finance and Economics, has been officially published in China Economic Quarterly, a domestic Class‑A authoritative journal.
Abstract
Within a New Keynesian framework, this paper incorporates sectorally heterogeneous financing constraints and shadow banking with default risk to investigate how shadow banking affects the effectiveness of structural monetary policy, as well as the optimal coordination between structural monetary policy and commercial bank capital regulation. The study finds that shadow banking amplifies the capacity of structural monetary policy to optimize the credit structure of commercial banks. During economic downturns, the optimal policy mix implements countercyclical adjustments targeting respective objectives. During economic booms, optimal capital regulation switches to procyclical adjustment to leverage the strengths of shadow banking in reinforcing the effects of structural monetary policy.
Chen Qiang is a Professor at the School of Economics, Shanghai University of Finance and Economics. His main research interests include financial econometrics, financial engineering, fintech, financial markets and macrofinance. He has published more than thirty papers in domestic and international journals such as Journal of Econometrics, Journal of Financial Econometrics, Journal of Financial Markets, China Economic Quarterly, and Journal of Management Science in China. He presides over multiple research projects including the General Program and Youth Program of the National Natural Science Foundation of China, and the Youth Fund for Humanities and Social Sciences Research of the Ministry of Education.
Li Yike is a 2020-entry doctoral student majoring in Western Economics at the School of Economics, Shanghai University of Finance and Economics. Supervised by Tenured Associate Professor Zhang Jingyi, her primary research directions cover macroeconomics, monetary policy and regulatory policy.
Jiang Zeyu is a 2020-entry master-doctor integrated student majoring in Econometrics at the School of Economics, Shanghai University of Finance and Economics. Supervised by Professor Chen Qiang, his main research field is macrofinance.
