Financial Frictions and the International Transmission of Shocks

Seoul Journal of Economics, 2019, Vol. 32, No. 4

36 Pages Posted: 16 Dec 2019

Date Written: November 30, 2019

Abstract

This study presents a two-good, two-country model with financial frictions, where banks facing a borrowing constraint intermediate funds between households and firms. The endogenous fluctuations of international relative prices increase the business cycle co-movement across countries when combined with habit formation in consumption and investment adjustment costs. Financial frictions due to the borrowing constraint of the banks further amplify the effects of productivity and capital quality shocks within a country and across the two countries.

Keywords: Financial friction, International transmission of shock, Business cycle co-movement

JEL Classification: E32, F41, F44, G15, G20

Suggested Citation

Park, Woong Yong, Financial Frictions and the International Transmission of Shocks (November 30, 2019). Seoul Journal of Economics, 2019, Vol. 32, No. 4. Available at SSRN: https://ssrn.com/abstract=3495387

Woong Yong Park (Contact Author)

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
6
Abstract Views
79
PlumX Metrics