Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212858 
Year of Publication: 
2016
Series/Report no.: 
BOFIT Discussion Papers No. 15/2016
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
This paper examines the international transmission of financial shocks which originate in, and are partially offset by, quantitative easing in a large financially-stressed country. Using a two-country model, we evaluate the adjustment in the non-stressed home country, following recurring negative shocks to productivity and banking-sector balance-sheet/terminal wealth ratios. We first examine the application of QE policies in the stressed foreign country. Coupling quantitative easing with crisis events abroad magnifies the financial instability transmitted to the rest of the world. Our results show that the non-stressed home country can make effective use of tax-rate rules for consumption, or taxes to stabilize financial-sector net worth in times of prolonged crisis abroad.
JEL: 
E44
E58
F38
F41
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-131-3
Document Type: 
Working Paper

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