SONOMA: A Small Open ecoNOmy for MAcrofinance

76 Pages Posted: 29 Nov 2018 Last revised: 23 May 2022

See all articles by Mariano (Max) Massimiliano Croce

Mariano (Max) Massimiliano Croce

Finance Department, Bocconi University; Centre for Economic Policy Research (CEPR)

Mohammad R. Jahan-Parvar

Board of Governors of the Federal Reserve System

Samuel Rosen

Temple University, Fox School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 18, 2018

Abstract

We develop a new small open economy model (SONOMA) in which domestic corporate debt and equities are affected by shocks to both external credit and equity markets. In a novel empirical analysis of several small-but-developed economies, we show that both external debt and equity shocks are important determinants of domestic economic fluctuations, corporate leverage, and net foreign asset positions. SONOMA replicates our empirical facts about asset prices, financial flows, and economic activity.

Keywords: External Positions, Credit and Equity Shocks, Asset Pricing

JEL Classification: F3, F4, G15

Suggested Citation

Croce, Mariano Massimiliano and Jahan-Parvar, Mohammad and Rosen, Samuel, SONOMA: A Small Open ecoNOmy for MAcrofinance (November 18, 2018). Available at SSRN: https://ssrn.com/abstract=3288963 or http://dx.doi.org/10.2139/ssrn.3288963

Mariano Massimiliano Croce

Finance Department, Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

HOME PAGE: http://sites.google.com/view/mmcroce/home

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mohammad Jahan-Parvar

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://sites.google.com/site/mrjahan/

Samuel Rosen (Contact Author)

Temple University, Fox School of Business ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

HOME PAGE: http://sites.google.com/view/samuel-rosen/

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