The project started with literature review on banking and monetary policy transmission as well as the theoretical works on shadow banking, including the seminal works by Sunderam et al. (2014), Nagel (2016), Gennaioli et al. (2013). More recently, the growing theoretical literature has made a strong link between shadow banking and the production of safe collaterals, so that our list of literature references - which tended to see regulatory arbitrage as the main determinant of shadow banking - has been extended to consider this new perspective as well. Based on this literature, we focused on the most relevant theoretical hypotheses to test. On the basis of these, we identified the type of information we needed for our empirical analyses. The theoretical approach has guided us through the data tracking and collection and to some extend the macro literature has also helped support the identification of our empirical strategy, which had to combine micro and macro models.
It then successfully complete the collection of the relevant data on shadow banking entities and the preparation of the dataset for empirical analyses according to the “Plan for Data Collection” described in the proposal. To the best of our knowledge, we are the first to perform a detailed analysis of the credit intermediation activity of ABCP conduits. As these entities are bankruptcy-remote vehicles with no employees and no clear governance structure, all the available data has been carefully examined to understand the possible channel of transmissions of monetary policy changes. This exercise has allowed us to obtain a deeper understating of the micro-aspects of shadow banking, therefore providing us with the basis for a substantial contribution to the literature. We collected data both the USD and EUR ABCP markets, where both US and NON-US conduits were active before the crisis. When available, we collected monthly data, quarterly otherwise. The time horizon spans from January 2001 to June 2007 and from 2008 to 2017. Unfortunately, there no data available for months around the collapse (August 2007) as entities were not reporting information in those months. The dataset records the following information for our sample of conduits’ ABCP issuances at funding structure-level: ABCP issuances in USD and EUR; in one market/currency and both markets/currencies; of conduits holding US and EU assets (pools/sellers); and of conduits with US and non-US sponsors;
In addition, we also collected information at the entity-level on: i. Rating, ii. Liquidity provider(s); iii. Type: Repo, Arbitrage, Multi-seller, Single-seller; iv. Support: Full and Partial;v. country of assets; vi. sponsor-level (rating, country); vii. Liabilities: ABCP notes outstanding and maximum amount authorised; viii. Assets: number of sellers/pools, portfolio composition by rating and asset class; before moving on the empirical studies.
The results of the project are of interest to both academics and policymakers. It is important to central bankers on two accounts. First, it fosters the understanding of the shadow banking sector. Secondly, it provides evidence of the transmission channels of monetary policy to the shadow banking sector. All the results were presented at the conferences and seminar. The relevant papers are due to publish next year.
