This paper investigates the transmission of financial shocks across large economies. To quantify these effects, we estimate a two-region open economy DSGE model that includes frictions in credit markets. The baseline model fails to replicate the high correlation between the U.S. and Euro Area...

This paper shows that when financial frictions are modeled dynamically, broader inferences can be drawn from DSGE models. By embedding a partial equilibrium framework of bankruptcy proceedings in a dynamic New Keynesian model I find, for example, that financial liberalization episodes are only...

In this paper we derive an alternative measure for structural unemployment using a stochastic frontier analysis. This measure, by empirical design, is always less than total unemployment and it is, thus, more consistent with the theoretical description of structural unemployment than its usual...

The literature typically finds that the development of financial markets has decreased the ability of central banks to affect the real economy. This paper shows that this negative relationship does not hold between the balance sheet channel of monetary transmission and bank globalization -- one...

This paper examines the effect of financial frictions on the strength of the credit channel of monetary transmission. We first use a DSGE model characterized by financial frictions as in Bernanke, Gertler, and Gilchrist (1999), and calibrate it using parameter values for countries with different...

In this paper we uncover a relationship between regional economic fluctuations and bankruptcy resolution capacity and predict that its direction depends on the cyclicality of bankruptcy. If bankruptcy is countercyclical (procyclical), we predict that economic fluctuations should be more(less)...

This paper investigates the transmission of macroeconomic shocks to production in a model that includes a large and a small bank. The two banks are differentiated by parameters that govern their sensitivities to their own and their borrowers’ balance sheets and simulations show that the large...

This paper shows that the deviation from the uncovered interest parity (UIP) condition is equally large in advanced and emergingmarket economies. Using monthly data, and a GARCH-M model we find that a large share of these deviations in both country groups are explained by time varying risk...

This paper investigates the transmission mechanism of financial shocks across large economies. To quantify these effects, we construct and estimate a two-region open economy DSGE model with nominal and real rigidities. We model the financial side of the economies using the financial accelerator...

The typical conclusion reached when researchers examine exchange rate exposure using a linear model is that only a few firms are exposed. This finding is puzzling since institutional knowledge and basic finance theory points to a larger effect. In this paper, we compare results obtained using a...