 Financial shocks, credit spreads, and the international credit channelAmbrogio Cesa-Bianchi and Andrej Sokol Journal of International Economics, 2022, vol. 135, issue C Abstract: We provide evidence on the international transmission of US financial shocks, and compare their effects to monetary policy and central bank information shocks in a two-country SVAR for the US and the UK. Adverse financial shocks trigger a contraction in the US economy and an increase in credit spreads. The tightening in US credit conditions is quickly transmitted internationally, leading to an increase in credit spreads and a slowdown in economic activity in the UK. As for monetary policy and central bank information shocks, cross-country comovement in credit spreads amplifies the impact of financial shocks on the real economy. Our findings support the notion of an ‘international credit channel’ as a key transmission mechanism for cross-country spillovers. Keywords: SVAR; Credit channel; International transmission; External instruments; Sign restrictions; Financial shocks; Monetary policy shocks; Information shocks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:135:y:2022:i:c:s0022199621001239 DOI: 10.1016/j.jinteco.2021.103543 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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