Global Banks, Financial Shocks And International Business Cycles: Evidence From An Estimated Model

Robert Kollmann ()

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

Abstract: This paper estimates a two-country model with a global bank, using US and Euro Area (EA) data, and Bayesian methods. The estimated model matches key US and EA business cycle statistics. Empirically, a model version with a bank capital requirement outperforms a structure without such a constraint. A loan loss originating in one country triggers a global output reduction. Banking shocks matter more for EA macro variables than for US real activity. Banking shocks account for about 3%-5% of the unconditional variance of US GDP and for 4%-14% of the variance of EA GDP. During the Great Recession (2007-09), banking shocks accounted for about 12%-20% of the fall in US and EA GDP, and for more than a third of the fall in EA investment and employment.

Keywords: financial crisis; global banking; real activity; investment; Bayesian econometrics. (search for similar items in EconPapers)
JEL-codes: E44 F36 F37 G21 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2013-05
New Economics Papers: this item is included in nep-ban, nep-dge, nep-eec and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (121)

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https://cama.crawford.anu.edu.au/sites/default/fil ... 30_2013_kollmann.pdf (application/pdf)

Related works:
Journal Article: Global Banks, Financial Shocks, and International Business Cycles: Evidence from an Estimated Model (2013)
Journal Article: Global Banks, Financial Shocks, and International Business Cycles: Evidence from an Estimated Model (2013)
Working Paper: Global Banks, Financial Shocks and International Business Cycles: Evidence from an Estimated Model (2012)
Working Paper: Global banks, financial shocks and international business cycles: evidence from an estimated model (2012)
Working Paper: Global Banks, Financial Shocks and International Business Cycles: Evidence from Estimated Models (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2013-30

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