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Effect of Confidence Shock on an Economy with a Shadow Banking System: Analysis Based on Dynamic Stochastic General Equilibrium Model
Institute of Economics, School of Social Sciences, Tsinghua University, Beijing, China
School of Economics, Peking University, Beijing, China
- 1 Institute of Economics, School of Social Sciences, Tsinghua University, Beijing, China
- 2 School of Economics, Peking University, Beijing, China
Theoretical Economics Letters·Volume 08 (2018)·Pages 3285–3300·Published 14 November 2018·DOI10.4236/tel.2018.815203
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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.
KeywordsShadow BankingOptimismDynamic Stochastic General Equilibrium ModelConfidence Shock
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