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SONOMA: a Small Open ecoNOmy for MAcrofinance

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Abstract

We develop a new small open economy model (SONOMA) in which domestic corporate debt and equities are affected by shocks to both external credit and equity markets. In a novel empirical analysis of several small-but-developed economies, we show that both external debt and equity shocks are important determinants of domestic economic fluctuations, corporate leverage, and net foreign asset positions. SONOMA replicates our empirical facts about asset prices, financial flows, and economic activity.

Suggested Citation

  • Mariano Croce & Mohammad R. Jahan-Parvar & Samuel Rosen, 2022. "SONOMA: a Small Open ecoNOmy for MAcrofinance," International Finance Discussion Papers 1349, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1349
    DOI: 10.17016/IFDP.2022.1349
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    1. Georgiadis, Georgios & Müller, Gernot J. & Schumann, Ben, 2024. "Global risk and the dollar," Journal of Monetary Economics, Elsevier, vol. 144(C).

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    More about this item

    Keywords

    External Positions; Credit and Equity Shocks; Asset Pricing;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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