Global Banks, Financial Shocks and International Business Cycles: Evidence from an Estimated Model

Robert Kollmann ()

No 8985, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper estimates a two-country model with a global bank, using US and Euro Area (EA) data, and Bayesian methods. The estimated model matches key US and EA business cycle statistics. Empirically, a model version with a bank capital requirement outperforms a structure without such a constraint. A loan loss originating in one country triggers a global output reduction. Banking shocks matter more for EA macro variables than for US real activity. During the Great Recession (2007-09), banking shocks accounted for about 20% of the fall in US and EA GDP, and for more than half of the fall in EA investment and employment.

Keywords: Bayesian econometrics; Financial crisis; Global banking; investment; Real activity (search for similar items in EconPapers)
JEL-codes: E44 F36 F37 G21 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac and nep-opm
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Citations: View citations in EconPapers (24)

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Related works:
Journal Article: Global Banks, Financial Shocks, and International Business Cycles: Evidence from an Estimated Model (2013)
Working Paper: Global Banks, Financial Shocks And International Business Cycles: Evidence From An Estimated Model (2013)
Working Paper: Global banks, financial shocks and international business cycles: evidence from an estimated model (2012)
Working Paper: Global Banks, Financial Shocks and International Business Cycles: Evidence from Estimated Models (2012)
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