The study between shadow banking and financial fragility in China: an empirical analysis based on the co-integration test and error correction model

The rapid development of shadow banking manifesting systematic risk has attracted increasing attention recently, but there exists a lack of empirical research in this field. This article applies co-integration analysis and error correction model using annual data during the 2001–2010 period to test the short-term fluctuation and long-term equilibrium between expansion velocity of shadow banking and financial fragility, and puts forward corresponding policy recommendations. Copyright Springer Science+Business Media B.V. 2013