Federal Reserve Bank of Dallas
Globalization Institute Working Papers
Global banks, financial shocks and international business cycles: evidence from an estimated model
This paper estimates a two-country model with a global bank, using U.S. and Euro area (EA) data, and Bayesian methods. The estimated model matches key U.S. and EA business cycle statistics. Empirically, a model version with a bank capital requirement outperforms a structure without such a constraint. A loan loss originating in one country triggers a global output reduction. Banking shocks matter more for EA macro variables than for U.S. real activity. During the Great Recession (2007–09), banking shocks accounted for about 20 percent of the fall in U.S. and EA GDP, and for more than half of the fall in EA investment and employment.
Cite this item
Robert Kollmann, Global banks, financial shocks and international business cycles: evidence from an estimated model, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 120, 2012.
Note: Published as: Kollmann, Robert (2013), "Global Banks, Financial Shocks and International Business Cycles: Evidence from an Estimated Model," Journal of Money, Credit and Banking 45 (s2): 159-195.
- 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
This item with handle RePEc:fip:feddgw:120
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