Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241200 
Year of Publication: 
2020
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2020-34
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We present a two-country model featuring risky lending and cross-border interbank market frictions. We find that (i) the strength of the financial accelerator, when applied to banks operating under uncertainty in an interbank market, will critically depend on the economic and financial structure of the economy; (ii) adverse shocks to the real economy can be the source of banking crisis, causing an increase in interbank funding costs, aggravating the initial shock; and (iii) asset purchases and central bank long-term refinancing operations can be effective substitutes for, or supplements to, conventional monetary policy.
Subjects: 
Credit and credit aggregates
Business fluctuations and cycles
International financial markets
Transmission of monetary policy
Monetary policy framework
JEL: 
E44
E52
F32
F36
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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