International Business Cycles and Financial Frictions

Wen Yao
This paper builds a two-country DSGE model to study the quantitative impact of financial frictions on business cycle co-movements when investors have foreign asset exposure. The investor in each country holds capital in both countries and faces a leverage constraint on her debt. I show quantitatively that financial frictions along with foreign asset exposure give rise to a multiplier effect that amplifies the transmission of shocks between countries. The key mechanism is that a negative...
This data repository is not currently reporting usage information. For information on how your repository can submit usage information, please see our documentation.