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Global financial stress and financial transmission channels

In: Handbook of Financial Integration

Author

Listed:
  • Sandra Eickmeier
  • Norbert Metiu
  • Josefine Quast
  • Sabine Tanneberger

Abstract

This chapter analyzes the international transmission of a global financial stress shock. The authors use a large-scale factor-augmented vector autoregressive model, estimated over quarterly macroeconomic and financial data for 40 countries. They identify the shock using a combination of contemporaneous zero and sign restrictions on impulse responses and narrative restrictions. Emerging economies suffer larger real output losses than advanced economies from a global financial stress shock. Advanced economies benefit from safe-haven capital flows and are better able to stabilize their economies through more active monetary and fiscal policy. The shock gives rise to co- movement in financial asset prices and quantities across countries. Hence, financial channels are crucial in the transmission mechanism.

Suggested Citation

  • Sandra Eickmeier & Norbert Metiu & Josefine Quast & Sabine Tanneberger, 2024. "Global financial stress and financial transmission channels," Chapters, in: Guglielmo M. Caporale (ed.), Handbook of Financial Integration, chapter 6, pages 134-171, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21716_6
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    File URL: https://www.elgaronline.com/doi/10.4337/9781803926377.00013
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    Keywords

    Economics and Finance;

    Statistics

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