International Contagion through Leveraged Financial Institutions

Eric van Wincoop

American Economic Journal: Macroeconomics, 2013, vol. 5, issue 3, 152-89

Abstract: The 2008 –2009 financial crises, while originating in the United States, witnessed a drop in asset prices and output that was at least as large in the rest of the world. We investigate, in the context of a simple two-country model, whether this could have been the result of transmission through leveraged financial institutions. The paper highlights what the various transmission mechanisms associated with balance sheet losses are. For realistic parameters we find that the model cannot account for the global nature of the crisis, both in terms of the size of the impact and the extent of transmission.

JEL-codes: E32 E44 F44 G01 G21 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mac.5.3.152
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Citations: View citations in EconPapers (15)

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Working Paper: International Contagion Through Leveraged Financial Institutions (2011)
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