REVIEW OF THE ARTICLE THE DETERMINANTS OF SHADOW BANKING IN THE EU MEMBER

STATES? EMPIRICAL PANEL COINTEGRATION APPROACH

The article deals with an interesting topic of macroeconomic and financial determinants of shadow
banking, measured by OFIs. Following the methodology developed by Arellano and Bond, the model
is specified as a dynamic panel regression with a lagged dependent variable, and a GMM estimator is
used to address the endogeneity caused by the correlation of error terms. The data covers 24 EU
countries, and the sample is then slit to OMS and NMS. The paper follows standard structure, and
the conclusions are based on the empirical results. The article has a potential. However, several
issues – listed below – should be addressed before the paper is suitable for publication.

1. The author should discuss in more details the novelty of the paper in regard to existing
studies in introduction as there have been studies working with a similar sample. Furthermore, the
same split of the data with slightly different variables included has been done before.

2. The author should check the final article by Hodula et. al (2020) not the WP version of this
article and incorporate it to the literature review as it works with a very similar sample.

Hodula, Martin, AlešMelecký a Martin Macháček (2020). Off the Radar: Factors behind the Growth of
Shadow Banking in Europe. Economic Systems 44(3). ISSN 0939-3625.

3. More attention should be paid to theoretical justification of included variables and closer
description of their influence on shadow banking. For instance, why is per capita GDP preferred over
real GDP? Is GDPPC in real or nominal terms? Furthermore, the theoretical effect of inflation is not
perfectly clear to me. It seems that the author assumes a positive relationship between inflationand
OFIs in the theoretical part (similar to search for yield effect) but later empirically finds a statistically
significant negative effect for NMS and provides a slightly different explanation for it.

4. The motivation for the split of the sample is rather weak and without any proof that the split
leads to “homogeneous” groups. Still, possibly significant differences between the north and south
may remain. The author should support the statement regarding the split from the introduction by
some evidence.

5. It could be interesting to see how individual parts of the financial development index
influence the shadow banking activities. The author may wish to discuss it.

6. The author should be careful while comparing the values of coefficients across different
samples – see e.g. values for Size of Banks…, where coefficient for EU24 (0.007) is much smaller than
the coefficients for both subsamples, i.e. NMS (0.021) and OMS (0.038).

7. I suggest modifying the title of the paper. I suggest substituting the question mark by colon
and modifying the second part of the title.

8. Check the literature again – text vs. list of references + some working papers might be
already published in a journal.