In the workhorse model of international real business cycles, financial integration exacerbates the cycle asymmetry created by country-specific supply shocks. The prediction is identical in response to purely common shocks in the same model augmented with simple country heterogeneity (eg, where...

This paper investigates the relationship between uncertainty and economic activity in a DSGE model with sticky prices and credit frictions. We analyse the effect of a mean preserving shock to the variance of aggregate total factor productivity (macro uncertainty) and we compare it to the effect...

This paper provides novel empirical evidence showing that foreign financial developments are a powerful predictor of domestic banking crises. Using a new data set for 38 advanced and emerging economies over 1970–2011, we show that credit growth in the rest of the world has a large positive...

Recent empirical evidence on the cross-country synchronization of credit spreads in response to US monetary policy shocks has led to the notion of an ‘international credit channel' of US monetary policy. This paper provides novel evidence on the existence of an international credit channel for...

This paper develops a model featuring both a macroeconomic and a financial friction that speaks to the interaction between monetary and macroprudential policy and to the role of US monetary and regulatory policy in the run up to the Great Recession. There are two main results. First, real...