DP5037 A Cross-Country Financial Accelerator: Evidence from North America and Europe
|Author(s):||Ashoka Mody, Lucio Sarno, Mark P Taylor|
|Publication Date:||May 2005|
|Keyword(s):||credit cycle, financial accelerator, international business cycles, Kalman filter|
|JEL(s):||E32, E51, F36|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5037|
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.