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I identify new patterns in countries' economic performance over the 2007-2014 period based on proximity through distance, trade, and finance to the US subprime mortgage and Eurozone debt crisis areas. To understand the causes of the cross-country variation, I develop an open economy model with...
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guarantees on both the probability of a systemic bank shock and that of a policy response. We find that deposit insurance and … safety net guarantees do not affect the probability of a systemic bank shock, but increase the probability of a policy … response to such a shock, consistent with the results of the previous literature. The joint use of measures of systemic bank …
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We study public funding of banks and non-financial firms in a time of crisis. We find that bank capitalization is more effective in stabilizing the economy than direct funding to firms, but it also creates larger distortions. We show that the optimal, social-welfare-maximizing, structure of a...
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show that these patterns can arise in a model where a financial shock temporarily increases the costs of external finance … substantially when investment falls after a financial shock. I find that this mechanism can account for almost a third of the …
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