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.