Khalil, Saed - In: European Journal of Economics and Economic Policies: … 12 (2015) 1, pp. 51-72
We investigate the propagation of contagion through banks' balance sheets in a two-country model. We simulate an increase in non-performing loans in one bank, and study the effects on other banks and the macro-economy of each country. We show that credit crunches destabilize each economy in the...