European Banks as America's shadow banks

By Prof Jayanth R Varma

Hyun Song Shin delivered the Mundell-Fleming lecture at the IMF Annual Research Conference earlier this month. This very interesting lecture argues that European banks essentially constitute the US shadow banking system.

While there has been much discussion of how the US has been relying on capital flows from Asia, there is little mention of Europe as a financing source. This is because Europe is not a significant source of net capital flow for the US