Shadow banking is commonly characterized as the answer of the modern financial industry to regulatory arbitrage. The main objective of the paper is to underline the magnitude of fragility that lies beneath the sector by analyzing both theoretically and empirically its evolution. The study highlights its complex structure, basic components and numerous implications accompanied with its function. Precisely, the size and role of investment funds sector is examined since its’ growth possess several vulnerabilities. Based on an existing methodology and using data from the United States, regarding the period 2002-2015, the study identifies a statistically significant relationship between specific sectors of investment funds and money demand. The main empirical findings provide robust evidence that investors run towards various sectors of investment funds and still constitute to the rise of shadow banking.
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