Emerging market countries that have improved institutions and attained intermediate levels of institutional quality have experienced severe financial crises following capital flow reversals. However, there is also evidence that countries with strong institutions and deep capital markets are less...

The literature typically finds that the development of financial markets has decreased the ability of central banks to affect the real economy. This paper shows that this negative relationship does not hold between the balance sheet channel of monetary transmission and bank globalization -- one...

This paper investigates the transmission mechanism of financial shocks across large economies. To quantify these effects, we construct and estimate a two-region open economy DSGE model with nominal and real rigidities. We model the financial side of the economies using the financial accelerator...

Emerging market countries that have improved institutions and attained intermediate levels of institutional quality have experienced severe financial crises following capital flow reversals. However, there is also evidence that countries with strong institutions and deep capital markets are less...

Costly state verification models predict that the sensitivity of borrowing costs to financial leverage is positively related to the level of state verification costs (financial frictions). This paper constructs a measure of financial frictions that is consistent with this prediction of theory....

The literature typically finds that the development of financial markets has decreased the ability of central banks to affect the real economy. This paper shows that this negative relationship does not hold for the balance sheet channel of monetary transmission and bank globalization -- one...