Global banking, financial spillovers and macroprudential policy coordination

Pierre Richard Agénor, Timothy P. Jackson, Luiz A. Pereira da Silva

Research output: Contribution to journalArticlepeer-review

Abstract

The transmission of financial shocks and the gains from international macroprudential policy coordination are studied in a two-region, core–periphery model with a global bank, a two-level financial structure and imperfect financial integration. The model replicates the stylized facts associated with global banking shocks, with respect to output, credit, house prices and real exchange rate fluctuations in recipient countries, as documented empirically. Numerical experiments, based on a parametrized version of the model, show that the gains from coordination increase with the degree of financial integration, which raises the scope for spillback effects from the periphery to the core, through trade and private capital flows. However, even when coordination is Pareto-improving, the resulting gains may be highly asymmetric across regions.

Original languageEnglish
Pages (from-to)1003-1040
Number of pages38
JournalEconomica
Volume90
Issue number359
DOIs
Publication statusPublished - Jul 2023

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