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Global Banks, Financial Shocks and International Business Cycles: Evidence from Estimated Models

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  • Robert Kollmann

    (ECARES, Université Libre de Bruxelles a)

Abstract

This paper takes a two-country model with a global bank to US and Euro Area (EA) data. The estimation results (based on Bayesian methods) suggest that global banking strengthens the positive international transmission of real economic disturbances. Shocks that originate in the banking sector account for roughly 20% of the forecast error variance of investment, and about 5% of the forecast variance of US and EA GDP. Bank shocks explain 5%-20% of the fall in US and EA real activity, during the Great Recession.

Suggested Citation

  • Robert Kollmann, 2012. "Global Banks, Financial Shocks and International Business Cycles: Evidence from Estimated Models," 2012 Meeting Papers 840, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:840
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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