International Contagion Through Leveraged Financial Institutions
The 2008-2009 financial crises, while originating in the United States, witnessed a drop in asset prices and output that was at least as large in the rest of the world as in the United States. A widely held view is that this was the result of global transmission through leveraged financial institutions. We investigate this in the context of a simple two-country model. The paper highlights what the various transmission mechanisms associated with balance sheet losses are, how they operate, what their magnitudes are and what the role is of different types of borrowing constraints faced by leveraged institutions. For realistic parameters we find that the model cannot account for the global nature of the crisis, both in terms of the size of the impact and the extent of transmission.
|Date of creation:||Dec 2011|
|Date of revision:|
|Publication status:||published as Eric van Wincoop, 2013. "International Contagion through Leveraged Financial Institutions," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 152-89, July.|
|Note:||AP EFG IFM|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Okawa, Yohei & van Wincoop, Eric, 2012.
"Gravity in International Finance,"
Journal of International Economics,
Elsevier, vol. 87(2), pages 205-215.
- Alicia GarcÃa-Herrero & Francisco F. Vazquez, 2007.
"International Diversification Gains and Home Bias in Banking,"
IMF Working Papers
07/281, International Monetary Fund.
- García-Herrero, Alicia & Vázquez, Francisco, 2013. "International diversification gains and home bias in banking," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2560-2571.
- Giovanni Lombardo & Luca Dedola, 2010.
"Financial Frictions, Financial Integration and the International Propagation of Shocks,"
2010 Meeting Papers
288, Society for Economic Dynamics.
- Luca Dedola & Giovanni Lombardo, 2012. "Financial frictions, financial integration and the international propagation of shocks," Economic Policy, CEPR;CES;MSH, vol. 27(70), pages 319-359, 04.
- Claudia M. Buch & John C. Driscoll & Charlotte Ostergaard, 2004.
"Cross-Border Diversification in Bank Asset Portfolios,"
2004/11, Norges Bank.
- Claudia M. Buch & John C. Driscoll & Charlotte Ostergaard, 2010. "Cross-Border Diversification in Bank Asset Portfolios," International Finance, Wiley Blackwell, vol. 13(1), pages 79-108, 03.
- Claudia M. Buch & John C. Driscoll & Charlotte Ostergaard, 2004. "Cross-border diversification in bank asset portfolios," Finance and Economics Discussion Series 2004-26, Board of Governors of the Federal Reserve System (U.S.).
- Buch, Claudia M. & Driscoll, John C. & Ostergaard, Charlotte, 2005. "Cross-border diversification in bank asset portfolios," Working Paper Series 0429, European Central Bank.
- Mehra, Rajnish & Prescott, Edward C., 1985.
"The equity premium: A puzzle,"
Journal of Monetary Economics,
Elsevier, vol. 15(2), pages 145-161, March.
- Gourio, François & Siemer, Michael & Verdelhan, Adrien, 2013.
"International risk cycles,"
Journal of International Economics,
Elsevier, vol. 89(2), pages 471-484.
- Robert Kollmann & Zeno Enders & Gernot J. Müller, 2010.
"Global Banking and International Business Cycles,"
Working Papers ECARES
ECARES 2010-028, ULB -- Universite Libre de Bruxelles.
- Kollmann, Robert & Enders, Zeno & Muller, Gernot J., 2011. "Global banking and international business cycles," Globalization and Monetary Policy Institute Working Paper 72, Federal Reserve Bank of Dallas.
- Robert KOLLMANN, 2011. "Global Banking and International Business Cycles," 2011 Meeting Papers 20, Society for Economic Dynamics.
- Enders, Zeno & Kollmann, Robert & Müller, Gernot, 2010. "Global Banking and International Business Cycles," CEPR Discussion Papers 7972, C.E.P.R. Discussion Papers.
- Fidora, Michael & Fratzscher, Marcel & Thimann, Christian, 2007.
"Home bias in global bond and equity markets: The role of real exchange rate volatility,"
Journal of International Money and Finance,
Elsevier, vol. 26(4), pages 631-655, June.
- Fidora, Michael & Fratzscher, Marcel & Thimann, Christian, 2006. "Home bias in global bond and equity markets: the role of real exchange rate volatility," Working Paper Series 0685, European Central Bank.
- Tobias Adrian & Hyun Song Shin, 2008. "Financial intermediary leverage and value at risk," Staff Reports 338, Federal Reserve Bank of New York.
- Ueda, Kozo, 2010.
"Banking globalization and international business cycles,"
Globalization and Monetary Policy Institute Working Paper
58, Federal Reserve Bank of Dallas.
- Kozo Ueda, 2010. "Banking Globalization and International Business Cycles," IMES Discussion Paper Series 10-E-16, Institute for Monetary and Economic Studies, Bank of Japan.
- Thomas Helbling & Ayhan Kose & Christopher Otrok & Raju Huidrom, 2010.
"Do Credit Shocks Matter? A Global Perspective,"
IMF Working Papers
10/261, International Monetary Fund.
- Michael B Devereux & James Yetman, 2010. "Financial deleveraging and the international transmission of shocks," BIS Papers chapters, in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 274-298 Bank for International Settlements.
- Daniel O. Beltran & Laurie Pounder Demarco & Charles P. Thomas, 2008. "Foreign exposure to asset-backed securities of U.S. origin," International Finance Discussion Papers 939, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17686. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.