Graduation Year

2017

Date of Submission

5-2017

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Richard C.K. Burdekin

Rights Information

© 2017 Chuyi Sheng

Abstract

The fast expansion of the shadow banking industry and its unregulated risks pose great challenges to the People's Bank of China. This paper uses the classic money multiplier and velocity models to investigate the impact of shadow banks on the effectiveness of monetary policies from 2006 to 2016.The time-series regression results show that shadow banks have a positive relationship with the velocity and a negative one with the multiplier. As the non-banks disrupt the traditional credit creation process and the central bank loses control of two important monetary indicators, the paper then discusses possible new intermediate targets and reforms that can alleviate the shadow banking problems.

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