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A cross-country financial accelerator: Evidence from North America and Europe

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  • Mody, Ashoka
  • Sarno, Lucio
  • Taylor, Mark P.

Abstract

A growing literature has examined the importance of credit market imperfections for macroeconomic fluctuations, the so-called financial accelerator. A related literature has provided evidence of international and regional co-movements in macroeconomic fluctuations. We tie together these strands of the literature in that we investigate the importance of both cross-country and country-specific credit cycles in explaining output fluctuations. Using data for four major economies and two world regions from 1973 to 2001, we find that both regional and country-specific components of indicators of credit availability are powerful in explaining output movements. This research provides the first empirical evidence of a cross-country financial accelerator.
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  • Mody, Ashoka & Sarno, Lucio & Taylor, Mark P., 2007. "A cross-country financial accelerator: Evidence from North America and Europe," Journal of International Money and Finance, Elsevier, vol. 26(1), pages 149-165, February.
    • Handle: RePEc:eee:jimfin:v:26:y:2007:i:1:p:149-165
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    Cited by:

    1. Mazhar Mahmood & Kashif ur Rehman, 2017. "Did Financial Integration Provide Financial Depth to ASEAN Countries?," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(1), pages 89-102, March.
    2. Eichengreen, Barry & Mody, Ashoka & Nedeljkovic, Milan & Sarno, Lucio, 2012. "How the Subprime Crisis went global: Evidence from bank credit default swap spreads," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1299-1318.
    3. Guglielmo Maria Caporale & Alessandro Girardi, 2016. "Business cycles, international trade and capital flows: evidence from Latin America," Empirical Economics, Springer, vol. 50(2), pages 231-252, March.
    4. Scopelliti, Alessandro Diego, 2013. "Off-balance sheet credit exposure and asset securitisation: what impact on bank credit supply?," MPRA Paper 43890, University Library of Munich, Germany.
    5. Davis, J. Scott, 2014. "Financial integration and international business cycle co-movement," Journal of Monetary Economics, Elsevier, vol. 64(C), pages 99-111.
    6. Iulia Lupu, 2012. "From the Financial Crisis to the Real Economy: the Main Channels of Transmission through a Theoretical Perspective," EuroEconomica, Danubius University of Galati, issue 2(31), pages 45-50, May.
    7. Bruno Coric, 2011. "The financial accelerator effect: concept and challenges," Financial Theory and Practice, Institute of Public Finance, vol. 35(2), pages 171-196.
    8. Claus, Iris, 2011. "Inside the black box: How important is the credit channel relative to the interest and exchange rate channels?," Economic Modelling, Elsevier, vol. 28(1), pages 1-12.
    9. Hosszú, Zsuzsanna & Körmendi, Gyöngyi & Mérő, Bence, 2016. "Egy- és többváltozós szűrők a hitelrés alakulásának meghatározására [Filters with single or multiple variables in measuring the size of the credit gap]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 233-259.
    10. J. Scott Davis, 2011. "Financial integration and international business cycle co-movement: the role of balance sheets," Globalization Institute Working Papers 89, Federal Reserve Bank of Dallas.
    11. K. Cuthbertson & D. Nitzsche & S. Hyde, 2007. "Monetary Policy And Behavioural Finance," Journal of Economic Surveys, Wiley Blackwell, vol. 21(5), pages 935-969, December.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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