Financial intermediation and the internationalbusiness cycle: The case of small countries with big banks
We examine the transmission mechanism of banking sector shocks in a two-country DSGE model. Assuming that the home country is small relative to the rest of world, we find that spillovers from foreign banking sector shocks are modest unless banks in the small country hold foreign banking assets. The correlation between home and foreign GDP rises with the exposure of the domestic banking sector to foreign bank assets.
Year of publication: |
2011-07
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Authors: | Kamber, Gunes ; Thoenissen, Christoph |
Institutions: | Crawford School of Public Policy, Australian National University |
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