Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/281784 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
WiSo-HH Working Paper Series No. 80
Publisher: 
Universität Hamburg, Fakultät für Wirtschafts- und Sozialwissenschaften, WiSo-Forschungslabor, Hamburg
Abstract: 
What are the effects of financial integration on global comovement? Using a standard two-country DSGE model, I show that in response to country-specific supply shocks higher exposure to foreign assets leads to lower cross-country output correlations, while the opposite is true for country-specific demand shocks. I argue that an important, yet overlooked, transmission channel originates in the interplay between financial integration and terms of trade movements in response to the shocks hitting the economy. The transmission channel is independent of whether the agents who hold the foreign assets are financially constrained or not.
Subjects: 
Business cycle comovement
Financial cycle comovement
Financial integration
Demand versus supply shocks
Terms of trade
Transfer Problem
Balance sheet effect
JEL: 
E30
E44
F41
F44
G15
Document Type: 
Working Paper

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