Heterogeneous Global Booms and Busts

Maryam Farboodi and Péter Kondor

American Economic Review, 2022, vol. 112, issue 7, 2178-2212

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.

JEL-codes: E21 E32 E43 E44 F44 G01 G15 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Heterogeneous global booms and busts (2022)
Working Paper: Heterogeneous Global Booms and Busts (2021)
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DOI: 10.1257/aer.20181830

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