This paper analyzes the impacts of Shadow banking system (SBS) on the nominal and real economy. It studies the SBSís data of 14 countries for 13 years using Generalizing estimation equation (GEE) method in SPSS statistics. The results showed that the increase in SBS was associated with large increase in nominal GDP rather than real GDP and thus causing nominal indicators of the economy to grow more than real ones. The paper concluded by suggesting that the SBS should be regulated and its size should be reduced from the current level to make financial system more stable and prevent future financial crisis.
JEL classification numbers: G2
Keywords: Shadow banking system, Nominal and real economy, Generalizing estimation equation (GEE).
ISSN: 1792-6599 (Online)