This paper examines the international transmission of financial shocks which originate in, and are partially offset by, quantitative easing in a large financially-stressed country. Using a two-country model, we evaluate the adjustment in the non-stressed home country, following recurring...

The 2008-2009 financial crises, while originating in the United States, witnessed a drop in asset prices and output that was at least as large in the rest of the world as in the United States. A widely held view is that this was the result of global transmission through leveraged financial...

We investigate the propagation of contagion through banks' balance sheets in a two-country model. We simulate an increase in non-performing loans in one bank, and study the effects on other banks and the macro economy of each country. We show that credit crunches destabilize each economy in the...

International financial integration helps to diversify risk but also may increase the trans- mission of crises across countries. We provide a quantitative analysis of this trade-off in a two-country general equilibrium model with endogenous portfolio choice and collateral con- straints....

We study how non-financial multinational companies propagate economic declines from their subsidiaries located in countries experiencing an economic downturn to subsidiaries in countries not experiencing one. We find that investment is 18% lower in subsidiaries of these parents relative to the...

International financial integration helps to diversify risk but also may increase the trans- mission of crises across countries. We provide a quantitative analysis of this trade-off in a two-country general equilibrium model with endogenous portfolio choice and collateral con- straints....

I study a two-country version of the banking model with financial markets developed in Allen and Gale (2004). Similar to their model, two types of banks arise endogenously in an autarkic economy: some always remain solvent and others can default. When the financial markets are integrated, three...