Stress and Substitution: A Theory of Opaque-Capital Allocation under Macro-Financial Pressure; Germany Illustration with Public-Data Validation

This paper develops a dynamic theory of opaque-capital allocation in which macro-financial stress reallocates laundering activity across channels instead of uniformly increasing it. Two agent types choose among formal intermediation,vehicle-based intermediation, and liquid opaque storage, withendogenous congestion and adjustment costs. The key result is that stress pushes activity toward channels with higher opacity and liquidity whentheir stress loadings exceed those of formal finance. Using German public data, stress is measured by the Bundesbank 10-year minus 2-year Bundslope over 2005-01-03 to 2025-12-30 and aggregated to a quarterly path for 2010Q1–2025Q4. From 2010Q2 to 2023Q3, the calibrated model lowers the formal-channel share by 18.0 percentage points and raises the cash/liquid share by 24.8 points. FIU and BaFin evidence is supportive but proxy-based, so the empirical material validates the mechanism rather than directly measuring laundering volume. JEL: D91, E44, G28, K42