International propagation of financial shocks in a search and matching environment

Marlene Isore

    Forskningsoutput: ArbetsdokumentDiskussionsartiklarVetenskaplig

    Sammanfattning

    This paper develops a two-country model in which transmission of financial shocks arises despite a flexible exchange rate regime and substitutable financial assets, contrary to the open-economy literature results under these two conditions. The search and matching approach first accounts for the time needed to restore normal functioning of financial markets following a disruption. It also allows dissociating two types of financial shocks: (i) pure liquidity contractions imply negative co-movements of home and foreign outputs, so that the model nests the standard open macroeconomy results as a particular case; (ii) shocks to banks’ capitalization costs in one country do generate international financial contagion.
    This paper develops a two-country model in which transmission of financial shocks arises despite a flexible exchange rate regime and substitutable financial assets, contrary to the open-economy literature results under these two conditions. The search and matching approach first accounts for the time needed to restore normal functioning of financial markets following a disruption. It also allows dissociating two types of financial shocks: (i) pure liquidity contractions imply negative co-movements of home and foreign outputs, so that the model nests the standard open macroeconomy results as a particular case; (ii) shocks to banks’ capitalization costs in one country do generate international financial contagion.
    Originalspråkengelska
    UtgivningsortHelsinki
    FörlagBank of Finland
    Antal sidor52
    ISBN (elektroniskt)978-952-323-135-1
    StatusPublicerad - 2016
    MoE-publikationstypD4 Publicerad utvecklings- eller forskningsrapport eller studie

    Vetenskapsgrenar

    • 511 Nationalekonomi

    Citera det här

    Isore, M. (2016). International propagation of financial shocks in a search and matching environment. (Bank of Finland Research Discussions Papers; Nr. 28/2016). Helsinki: Bank of Finland.
    Isore, Marlene. / International propagation of financial shocks in a search and matching environment. Helsinki : Bank of Finland, 2016. (Bank of Finland Research Discussions Papers; 28/2016).
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    Isore, M 2016 'International propagation of financial shocks in a search and matching environment' Bank of Finland Research Discussions Papers, nr. 28/2016, Bank of Finland, Helsinki.

    International propagation of financial shocks in a search and matching environment. / Isore, Marlene.

    Helsinki : Bank of Finland, 2016. (Bank of Finland Research Discussions Papers; Nr. 28/2016).

    Forskningsoutput: ArbetsdokumentDiskussionsartiklarVetenskaplig

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    Isore M. International propagation of financial shocks in a search and matching environment. Helsinki: Bank of Finland. 2016. (Bank of Finland Research Discussions Papers; 28/2016).