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Miss Yugi Zheng

Graduate Tutor

Cardiff Business School


Yuqi is a Ph.D. Economics candidate at the Cardiff Business School since 2018 after she graduated from Cardiff University (MSc International Economics, Banking&Finance (with Distinction), 2018). Her PhD thesis is about a DSGE model of shadow banking, under supervision of Prof. Patrick Minford, Prof. David Meenagh and Prof. Vo Phuong Mai Le.

She delivered tutorials for both MSc and BSc courses, such as

  • Applied macroeconomics and finance(BS3570)
  • Macroeconomic theory(BS2549)
  • Quantitative Methods(BST164)

Thesis(submitted in November 2023)

A DSGE Model of Shadow Banking in the US

A brief summary : In this paper, we examine the role of shadow banking in a DSGE model by allowing shadow bank lending to firms, we find that shadow banking lending is beneficial to macroeconomic stability as it dampens the responses of the variables to shocks and affects the effectiveness of macro-prudential policy. We contrast our baseline model with shadow banking to a counterfactual one in which shadow banking shut off, we then test and re-estimate the model by the method of Indirect Inference, we find that our shadow banking model fits better than the counterfactual one, and the Indirect inference estimation results imply that higher estimates on share of direct equity investment can help reduce credit premium by providing a cheaper channel for credit leakage,so that the existence of the shadow banking lowers the frictions by protecting investment immune to shocks. We then extract the model’s implied residuals on US unfiltered data since 1980 to replicate how the model predicts the crisis and look at the variance decomposition by running a variety of simulations bootstrapped from different sets of shocks in our sample, we find that the non- stationary productivity shock is the main driver of the US business cycle fluctuations. 

Key Word: DSGE model, financial frictions, Indirect Inference, bootstrapping simulation


  • Macroeconomics