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Financial intermediation and the international business cycle: The case of small countries with big banks

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  • Gunes Kamber
  • Christoph Thoenissen

Abstract

We examine the transmission mechanism of banking sector shocks in a two-country DSGE model. Assuming that the home country is small relative to the rest of world, we find that spillovers from foreign banking sector shocks are modest unless banks in the small country hold foreign banking assets. The correlation between home and foreign GDP rises with the exposure of the of the domestic banking sector to foreign bank assets.

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File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/wp1108.pdf
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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 201108.

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Date of creation: 21 Jun 2011
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Handle: RePEc:san:cdmawp:1108

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Cited by:
  1. Gustavo Adler, 2012. "Intertwined Sovereign and Bank Solvencies in a Model of Self-Fulfilling Crisis," IMF Working Papers 12/178, International Monetary Fund.
  2. PIROVANO, Mara, 2013. "International financial integration, credit frictions and exchange rate regimes," Working Papers 2013015, University of Antwerp, Faculty of Applied Economics.
  3. Mara Pirovano, 2013. "Household and firm leverage, capital flows and monetary policy in a small open economy," Working Paper Research 246, National Bank of Belgium.
  4. Robert Kollmann, 2012. "Global banks, financial shocks and international business cycles: evidence from an estimated model," Globalization and Monetary Policy Institute Working Paper 120, Federal Reserve Bank of Dallas.
  5. Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2013. "Banks, Sovereign Debt, and the International Transmission of Business Cycles," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 9(1), pages 181 - 213.

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