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Discussion Paper Details

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Title: A Cross-Country Financial Accelerator: Evidence from North America and Europe

Author(s): Ashoka Mody, Lucio Sarno and Mark P Taylor

Publication Date: May 2005

Keyword(s): credit cycle, financial accelerator, international business cycles and Kalman filter

Programme Area(s): International Macroeconomics

Abstract: A growing literature has examined the importance of credit market imperfections for macroeconomic fluctuations, the so-called financial accelerator. A related literature has provided evidence of international and regional co-movements in macroeconomic fluctuations. We tie together these strands of the literature in that we investigate the importance of both cross-country and country-specific credit cycles in explaining output fluctuations. Using data for four major economies and two world regions from 1973 to 2001, we find that both regional and country-specific components of indicators of credit availability are powerful in explaining output movements. This research provides the first empirical evidence of a cross-country financial accelerator.

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Bibliographic Reference

Mody, A, Sarno, L and Taylor, M. 2005. 'A Cross-Country Financial Accelerator: Evidence from North America and Europe'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5037