UNDERSTANDING SHADOW BANKING AND IT'S ROLE IN THE RECENT FINANCIAL CRISIS

Prevailing approach which dominates science of economics is "invisible hand," that is, a world where private decisions are unknowingly guided by prices to allocate resources efficiently. The credit crisis raises the question of how it is that we could get slapped in the face by the invisib...

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Bibliographic Details
Published in:Montenegrin journal of economics 2013-01, Vol.9 (1), p.75
Main Authors: Jovovic, Radislav, Jovovic, Nebojsa
Format: Article
Language:English
Subjects:
Balance sheets
Bank failures
Banking
Banking industry
Collateral
Economic crisis
Equilibrium
Housing
Loans
Securities markets
Securitization
Shadow banking
Stock exchanges
Studies
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Summary:Prevailing approach which dominates science of economics is "invisible hand," that is, a world where private decisions are unknowingly guided by prices to allocate resources efficiently. The credit crisis raises the question of how it is that we could get slapped in the face by the invisible hand. What happened? Very actual opinion today is: that market is a imperfect mechanism? There is strong polarity in economics thoughts: but today fewer economists argue the ability of "invisible hand" to fully regulate market. Taking into account this situation, we stared to believe that there are many different ways of thinking about the recent financial crisis. And we wanted to focus on one way that people think about it in terms of probabilities of deviating good bank equilibrium. Through our research of bank nature, we found that the shadow banking system played a major role in the recent financial crisis. Focus of this paper is to contribute understanding of shadow banking system in function of avoiding future financial crisis. [PUBLICATION ABSTRACT]
ISSN:1800-5845
1800-6698