The Macroeconomic Effect of Shadow Credit Market Financing

Abstract

Shadow credit market is a credit creation market which is parallel to the bank credit market. It has the function of credit creation, liquidity conversion and maturity transformation. In this paper, based on the different participants of shadow credit market, we divides it to the dealer, formal financial institution and private lending credit markets and measures the scale of shadow credit market. Based on the monthly data from year 2006 to 2014, by constructing VAR model, the paper attempts to analyze the macroeconomic effect of the shadow credit market financing. The research results show, firstly, shadow credit market as a way of resource allocation, has certain positive effect in meeting the needs of social investment and financing and promoting economic growth. Secondly, shadow credit market has changed the traditional money supply model and transmission mechanism of monetary policy, expanding the money supply and weakening the effectiveness of monetary policy. Thirdly, the shadow credit market impact the price level through influencing credit market scale and money supply.