The gains from international macroprudential policy coordination are studied in a two-region, core-periphery macroeconomic model with imperfect financial integration and cross-border banking. Financial frictions occur at two levels: between firms and banks in each region, and between periphery...

This paper discusses the scope for international macroprudential policy coordination in a financially integrated world economy. It first reviews the transmission channels associated with, and the empirical evidence on, financial spillovers and spillbacks - which have both increased in magnitude...

This paper examines the effect of volatility on the costs and benefits of financial market integration. The basic framework combines the costly state verification model and the contract enforceability approach. The welfare effects of financial market integration are assessed by comparing welfare...

This paper interprets contagion effects as a perceived increase (triggered by events occurring elsewhere) in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic...

This paper provides a selective review of the recent analytical and empirical literature on the benefits and costs of international financial integration. It discusses the impact of financial openness and capital flows on consumption, investment and growth, as well as the impact of foreign bank...