Empirical Research on the Credit Risk Spillover Effect of Internet Shadow Banking∗

Abstract

This paper sorts out the mechanism of credit risk contagion in Internet shadow banking, selects interest rate data from the formal financial market and shadow banking market, constructs bivariate normal Copula model and bivariate t-Copula model to analyze the dependence of Internet shadow banking interest rates with shadow banking interest rates and formal market interest rates, to measure the contagious spillover effects of Internet shadow banking credit risks on other financial markets. The study found that Internet shadow banking credit risks spread to other financial markets through two channels: interest rate fluctuations and interest rate spreads, and Internet shadow banking credit risks mainly spills over to the shadow banking market and has little impact on the formal financial market. Therefore, we should focus on the prevention and control of credit risks in shadow banking market.