The cross-country interbank market in the euro area was a crucial transmission channel of financial stress. By using a two-country DSGE model of a financially heterogeneous monetary union where banks in one country lend funds to their foreign counterparts, I examine its role as shock ampli.er...

This paper studies the interaction of international shadow banking with monetary and macroprudential policy in a two-country currency union DSGE model. We find evidence that cross-country financial integration through the shadow banking system is a source of financial contagion in response to...

There has recently been increased research and policy interest in the divergent macroeconomic performance in the European Economic and Monetary Union (EMU). Understanding the underlying factors of macroeconomic differentials, the source and transmission of shocks and the adjustment process in...

This paper seeks to evaluate quantitatively how interbank and corporate cross-border flows shape business cycles in a monetary union. Using Bayesian techniques, we estimate a two-country DSGE model that distinguishes between Eurozone core and peripheral countries and accounts for national...

Credit spreads display occasional spikes and are more strongly countercyclical in times of financial stress. Financial crises are extreme cases of this nonlinear behavior, featuring skyrocketing credit spreads, sharp losses in bank equity, and deep recessions. We develop a macroeconomic model...

We analyse the interaction between monetary and macroprudential policies in the euro area by means of a two-country DSGE model with financial frictions and cross-border spillover effects. We calibrate the model for the four largest euro area countries (i.e. Germany, France, Italy, and Spain),...

This paper evaluates business cycle and welfare effects of cross-country mortgage market heterogeneity for a monetary union. By employing a calibrated two-country New Keynesian DSGE model with collateral constraints tied to housing values, we show that a change in cross-country institutional...

We analyse the interaction between monetary and macroprudential policies in the euro area by means of a two-country DSGE model with financial frictions and cross-border spillover effects. We calibrate the model for the four largest euro area countries (i.e. Germany, France, Italy, and Spain),...

There has recently been increased research and policy interest in the divergent macroeconomic performance in the European Economic and Monetary Union (EMU). Understanding the underlying factors of macroeconomic differentials, the source and transmission of shocks and the adjustment process in...