TY  - JOUR
AU  - Guerrieri, Luca
AU  - Iacoviello, Matteo
AU  - Minetti, Raoul
TI  - Banks, Sovereign Debt and the International Transmission of Business Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18303
PY  - 2012
Y2  - August 2012
DO  - 10.3386/w18303
UR  - http://www.nber.org/papers/w18303
L1  - http://www.nber.org/papers/w18303.pdf
N1  - Author contact info:
Luca Guerrieri
The Federal Reserve Board
Mail Stop 20
20th and C Street, N.W.
Washington, D.C.   20551
E-Mail: luca.guerrieri@frb.gov

Matteo Iacoviello
Federal Reserve Board
Mail Stop 20
20th and C st NW
Washington DC 20551
E-Mail: matteo.iacoviello@frb.gov

Raoul Minetti
Michigan State University
E-Mail: minetti@msu.edu
M1  - published as Luca Guerrieri, Matteo Iacoviello, Raoul Minetti. "Banks, Sovereign Debt, and the International Transmission of Business Cycles," in Francesco Giavazzi and Kenneth D. West, organizers, "NBER International Seminar on Macroeconomics 2012" University of Chicago Press (2013)

M3  - presented at "ISOM", June 15-16, 2012
AB  - This paper studies the international propagation of sovereign debt default. We posit a two-country economy where capital constrained banks grant loans to firms and invest in bonds issued by the domestic and the foreign government. The model economy is calibrated to data from Europe, with the two countries representing the Periphery (Greece, Italy, Portugal and Spain) and the Core, respectively. Large contractionary shocks in the Periphery trigger sovereign default. We find sizable spillover effects of default from Periphery to the Core through a drop in the volume of credit extended by the banking sector.
ER  -