Inspecting cross-border macro-financial mechanisms

Gerba, Eddie; Leiva-Leon, Danilo; Rubio, Margarita

Abstract

We model structural time-varying macro-financial linkages between the U.S. and euro area using a large dataset for each region. We extract both real and financial cycles and identify shocks, using a factor model with drifting parameters. To interpret the mechanisms that drive the empirical results, we contextualize our estimates using a two-country financial accelerator model. Our evidence speaks clearly of an asymmetric cross-border transmission between U.S. and euro area, especially in the financial domain. This is confirmed by our theoretical complement, which shows a strong transmission of U.S. TFP shocks. Moreover, the U.S. is a more leveraged economy, which accentuates the financial accelerator effect.

Citation

Gerba, E., Leiva-Leon, D., & Rubio, M. (2024). Inspecting cross-border macro-financial mechanisms. Journal of International Money and Finance, 145, Article 103094. https://doi.org/10.1016/j.jimonfin.2024.103094

• Journal Article Type: Article
• Acceptance Date: May 3, 2024
• Online Publication Date: May 10, 2024
• Publication Date: 2024-07
• Deposit Date: Jul 29, 2024
• Publicly Available Date: Nov 11, 2025
• Journal: Journal of International Money and Finance
• Print ISSN: 0261-5606
• Electronic ISSN: 1873-0639
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 145
• Article Number: 103094
• DOI: https://doi.org/10.1016/j.jimonfin.2024.103094
• Public URL: https://nottingham-repository.worktribe.com/output/34448694
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0261560624000810
• Additional Information: This article is maintained by: Elsevier; Article Title: Inspecting cross-border macro-financial mechanisms; Journal Title: Journal of International Money and Finance; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jimonfin.2024.103094; Content Type: article; Copyright: © 2024 The Author(s). Published by Elsevier Ltd.