IDEAS home Printed from https://ideas.repec.org/a/taf/revpoe/v36y2024i3p1156-1173.html
   My bibliography  Save this article

Financial Growth and Crash under Shadow Banking

Author

Listed:
  • Amit Bhaduri
  • Srinivas Raghavendra

Abstract

This article develops a macroeconomic model of interaction between the real sector and the financial sector, and explores the conditions that make the economy vulnerable to sudden collapse as a result of finance-led growth. It extends the Kaleckian framework of the link between profit and investment in a modern financialized economy with some specific features of shadow banking and articulates the underlying dynamics that render the economy systemically fragile and vulnerable to abrupt crashes. We elaborate on this link through a stock-flow consistent accounting framework and study the dynamics through two interacting forces of the shadow banking sector: profit-seeking and liquidity preference. The article formally articulates the dynamics through the framework of ‘cusp catastrophe’ and identifies some early warning signs of potential financial collapse.

Suggested Citation

  • Amit Bhaduri & Srinivas Raghavendra, 2024. "Financial Growth and Crash under Shadow Banking," Review of Political Economy, Taylor & Francis Journals, vol. 36(3), pages 1156-1173, July.
    • Handle: RePEc:taf:revpoe:v:36:y:2024:i:3:p:1156-1173
    DOI: 10.1080/09538259.2022.2099667
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09538259.2022.2099667
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09538259.2022.2099667?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:revpoe:v:36:y:2024:i:3:p:1156-1173. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CRPE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.