Money, Method and Contemporary Post-Keynesian Economics
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Money, Method and Contemporary Post-Keynesian Economics

Edited by Sheila Dow, Jesper Jespersen and Geoff Tily

This volume concentrates on contemporary Post-Keynesian contributions in money, method and economic policy. Post-Keynesian economics shares with Keynes the ambition of understanding the economy as a whole and as an integrated part of society. The book begins by analysing money, banks and finance as dynamic phenomena, followed by chapters focusing on methodological themes such as uncertainty, longer-term issues, sustainability and other non-monetary economic activities.
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Chapter 6: Shadow banking in emerging economies like India

Sunanda Sen

Abstract

Financial markets rest on the proliferation of credit, not just within formal, regulated banking channels, but also along unregulated, or shadow, banks. Unlike regular banks, shadow banks function beyond the jurisdiction of the monetary authorities. While decisions to lend and borrow are subject to risks which are systemic and unquantifiable, transactions on the part of the unregulated banks can further exacerbate these risks by encountering new types of risk within informal credit channels. Given that these channels, while providing additional credit, often lead to excess risks for lenders, additional charges are levied on borrowers. Thus there arises a need to enquire into the pattern of these credit channels, especially in developing countries where large sections of borrowers cannot afford the high cost of such loans.

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