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Working Paper
The Global Transmission of Real Economic Uncertainty
Using a sample of 30 countries representing about 65% of the global GDP, we find that real economic uncertainty (REU) has negative long-lasting domestic economic effects and transmits across countries. The international spillover effects of REU are (i) additional to those of domestic REUs, (ii) statistically significant, and (iii) economically meaningful. Trade ties play a key role in explaining why uncertainty generated in one country can affect economic outcomes in other countries. Based on this evidence, we construct a novel index for global REU as the trade-weighted average of all ...
Working Paper
Global Banking and Firm Financing: A Double Adverse Selection Channel of International Transmission
This paper proposes a "double adverse selection channel" of international transmission. It shows, theoretically and empirically, that financial systems with both global and local banks exhibit double adverse selection in credit allocation across firms. Global (local) banks have a comparative advantage in extracting information on global (local) risk, and this double information asymmetry creates a segmented credit market where each bank lends to the worst firms in terms of the unobserved risk factor. Given a bank funding (e.g., monetary policy) shock, double adverse selection affects firm ...