Heterogeneous global booms and busts

Farboodi, Maryam and Kondor, Peter (2022) Heterogeneous global booms and busts. American Economic Review, 112 (7). 2178 - 2212. ISSN 0002-8282

Text (AER-2018-1830.R2_ProofofSubmission) - Accepted Version Download (4MB)

• Author
• Scopus publication

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.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/aer
Additional Information:	© 2022 American Economic Association
Divisions:	Finance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HB Economic Theory
JEL classification:	E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Determination of Interest Rates; Term Structure of Interest Rates E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
Date Deposited:	31 Mar 2022 11:12
Last Modified:	17 Apr 2024 21:12
URI:	http://eprints.lse.ac.uk/id/eprint/114547

Actions (login required)

View Item