A Cross-Country Financial Accelerator: Evidence from North America and Europe

29 Pages Posted: 13 Sep 2005

See all articles by Ashoka Mody

Ashoka Mody

International Monetary Fund (IMF) - Research Department

Lucio Sarno

City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)

Mark P. Taylor

Washington University in St. Louis - John M. Olin Business School; Centre for Economic Policy Research (CEPR)

Date Written: May 2005

Abstract

A growing literature has examined the importance of credit market imperfections for macroeconomic fluctuations, the so-called financial accelerator. A related literature has provided evidence of international and regional co-movements in macroeconomic fluctuations. We tie together these strands of the literature in that we investigate the importance of both cross-country and country-specific credit cycles in explaining output fluctuations. Using data for four major economies and two world regions from 1973 to 2001, we find that both regional and country-specific components of indicators of credit availability are powerful in explaining output movements. This research provides the first empirical evidence of a cross-country financial accelerator.

Keywords: Financial accelerator, credit cycle, international business cycles, Kalman filter

JEL Classification: E32, E51, F36

Suggested Citation

Mody, Ashoka and Sarno, Lucio and Taylor, Mark Peter, A Cross-Country Financial Accelerator: Evidence from North America and Europe (May 2005). CEPR Discussion Paper No. 5037. Available at SSRN: https://ssrn.com/abstract=774164

Ashoka Mody

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)

HOME PAGE: http://www.amody.com

Lucio Sarno (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mark Peter Taylor

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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