Financial intermediation and the internationalbusiness cycle: The case of small countries with big banks

Gunes Kamber and Christoph Thoenissen ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We examine the transmission mechanism of banking sector shocks in a two-country DSGE model. Assuming that the home country is small relative to the rest of world, we find that spillovers from foreign banking sector shocks are modest unless banks in the small country hold foreign banking assets. The correlation between home and foreign GDP rises with the exposure of the domestic banking sector to foreign bank assets.

Date: 2011-07
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Working Paper: Financial intermediation and the international business cycle: The case of small countries with big banks (2011)
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Persistent link: http://EconPapers.repec.org/RePEc:een:camaaa:2011-22

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