The 2008 â€“2009 financial crises, while originating in the United
States, witnessed a drop in asset prices and output that was at least
as large in the rest of the world. We investigate, in the context of a
simple two-country model, whether this could have been the result
of transmission through leveraged financial institutions. The paper
highlights what the various transmission mechanisms associated
with balance sheet losses are. For realistic parameters we find that
the model cannot account for the global nature of the crisis, both
in terms of the size of the impact and the extent of transmission.
van Wincoop, Eric.
"International Contagion through Leveraged Financial Institutions."
American Economic Journal: Macroeconomics,
Business Fluctuations; Cycles
Financial Markets and the Macroeconomy
International Business Cycles
Banks; Depository Institutions; Micro Finance Institutions; Mortgages