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Macro determinants of shadow banking in Central and Eastern European countries

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  • Constantin-Marius Apostoaie
  • Irina Bilan

Abstract

Our study aims to quantitatively assess some of the determinants of shadow banking dynamics in 11 European Union (E.U.) countries from Central and Eastern Europe (C.E.E.) over the period 2004–2017. Using panel data estimation techniques and a quarterly data set compiled from several publicly available data sources, we alternatively evaluate the impact of six macroeconomic and financial variables on two dependent variables corresponding to two different measures of the shadow banking sector, namely the broad one (including all non-monetary financial institutions, except insurance corporations and pension funds) and the narrow one (excluding from the above one the investment funds, other than money market funds [M.M.F.]). Our findings confirm that shadow banking is sensitive to overall macroeconomic conditions and that economic growth positively influences the expansion of this segment of the financial sector. In addition, a higher demand for funds from institutional investors, which also reveals a more developed financial system, supports the expansion of the shadow banking sector. Moreover, in a low interest rate environment, the search for yield makes investors turn to shadow banks, while the development of the shadow banking sector is also found to be complementary to the development of the rest of the financial system, in particular, traditional banks.

Suggested Citation

  • Constantin-Marius Apostoaie & Irina Bilan, 2020. "Macro determinants of shadow banking in Central and Eastern European countries," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 1146-1171, January.
    • Handle: RePEc:taf:reroxx:v:33:y:2020:i:1:p:1146-1171
    DOI: 10.1080/1331677X.2019.1633943
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    Cited by:

    1. Yulia S. Evlakhova & Nataliya A. Amosova, 2022. "Nonbank Financial Intermediation in Times of Crisis: Identifying Leadership in the G20 Countries," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 21(3), pages 426-453.
    2. Saibal Ghosh, 2022. "Does financial interconnectedness affect monetary transmission? Evidence from India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 15(3), pages 273-300, September.
    3. Athari, Seyed Alireza & Isayev, Mugabil & Irani, Farid, 2024. "Does country risk rating explain shadow banking development? Insights from advanced and emerging market economies," Economic Systems, Elsevier, vol. 48(2).
    4. Mugabil Isayev, 2024. "Unraveling the interplay of financial inclusion, stability, and shadow banking in emerging markets," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-17, April.

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