Financial Intermediation in a Global Environment
by Victoria Nuguer
Banco de México
I develop a two-country DSGE model with global banks (financial intermediaries in one country lend to banks in the other country). Banks are financially constrained on how much
they can borrow from households. The main goal is to obtain a framework that captures the international transmission of a financial crisis through the balance sheet of the global banks as
well as to explain the insurance mechanism of the international asset market. A negative shock to the value of capital in one country generates a global financial crisis through the international
interbank market. Unconventional credit policies help to mitigate the effects of a financial disruption. The policies help to improve domestic consumers’ welfare. The non-cooperative
equilibrium yields both central banks intervening.
JEL Codes: G01, E44, F40, G21.
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Discussion by Robert Kollmann