International financial shocks in emerging markets

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn the present paper, we develop a two-sector general equilibrium model of a small open economy to explore the transmission mechanisms of external financial shocks. In particular, we use a cash-in-advance model with limited participation augmented with a financial friction in the form of a fundamentals-related risk premium on external funds. The friction amplifies the effects of external financial shocks, especially when the economy is highly indebted in foreign currency. For a set of Latin American economies, the theoretical model is calibrated to match the empirical impulse responses of output, investment, trade balance, and domestic credits in response to an adverse shock to the country risk premium. In addition, we analyze the role of monetary policy during the financial crisis.

Different No More: Country Spreads in Advanced and Emerging Economies

“…There is also model-based work that provides microfoundations for interest-rate fluctuations (e.g. Brei and Buzaushina 2015;Fernández and Gulan 2015). Corsetti et al (2013) and Bocola (2016) put forward models where sovereign risk spills over to the private sector, affecting financing condition adversely.…”

Financial Frictions in Mexico: Evidence from the Credit Spread and its Components

“…Some examples areBlanchard, Das and Faruqee (2010),Akinci (2013),Brei and Buzaushina (2015), Ben Zeev (2019) andEpstain, Finkelstein-Shapiro, Gonzáles-Gómez (2019).…”