TY  - JOUR
AU  - Kalemli-Ozcan,Sebnem
AU  - Papaioannou,Elias
AU  - Perri,Fabrizio
TI  - Global Banks and Crisis Transmission
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18209
PY  - 2012
Y2  - July 2012
UR  - http://www.nber.org/papers/w18209
L1  - http://www.nber.org/papers/w18209.pdf
N1  - Author contact info:
Sebnem Kalemli-Ozcan
Department of Economics
University of Maryland
Tydings Hall 4118D
College Park, MD 20742-7211
Tel: 301/405-3266
E-Mail: kalemli@econ.umd.edu

Elias Papaioannou
London Business School
Regent's Park
Sussex Place
London NW1 4SA
United Kingdom
Tel:  +44 (0) 207000 8432
Fax: +44 (0) 207000 8401
E-Mail: papaioannou.elias@gmail.com

Fabrizio Perri
Universita' Bocconi
Department of Economics
Via Roentgen, 1 - 20136
Milano, Italy
Tel: +39 02 5836 5793
E-Mail: fperri@umn.edu
AB  - We study the effect of financial integration (through banks) on the transmission of international business cycles. In a sample of 20 developed countries between 1978 and 2009 we find that, in periods without financial crises, increases in bilateral banking linkages are associated with more divergent output cycles.This relation is significantly weaker during financial turmoil periods, suggesting that financial crises induce co-movement among more financially integrated countries. We also show that countries with stronger, direct and indirect, financial ties to the U.S. experienced more synchronized cycles with the U.S. during the recent 2007-2009 crisis. We then interpret these findings using a simple general equilibrium model of international business cycles with banks and shocks to banking activity. The model suggests that the relation between integration and synchronization depends on the type of shocks hitting the world economy, and that shocks to global banks played an important role in triggering and spreading the 2007-2009 crisis.
ER  -