Heterogeneous global booms and busts

Maryam Farboodi and Péter Kondor

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We investigate the heterogeneous boom and bust patterns across countries that emerge as a result of global shocks. Our analysis sheds light on the emergence of core and periphery countries, and the joint determination of the depth of recessions and tightness of credit across countries. The model implies that interest rates are similar across core and periphery countries in booms, with larger credit and output growth in periphery countries. However, a common global shock that leads to a credit crunch across the globe gives rise to a sharper spike in interest rates and a deeper recession in periphery countries, while a credit flight to the core alleviates the adverse consequences in these countries.

Keywords: international credit markets; global cycles; information frictions (search for similar items in EconPapers)
JEL-codes: E21 E32 E43 E44 G15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2022-07-01
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in American Economic Review, 1, July, 2022, 112(7), pp. 2178 - 2212. ISSN: 0002-8282

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http://eprints.lse.ac.uk/114547/ Open access version. (application/pdf)

Related works:
Journal Article: Heterogeneous Global Booms and Busts (2022)
Working Paper: Heterogeneous Global Booms and Busts (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:114547

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