Leverage Constraints and the International Transmission of Shocks

@inproceedings{Devereux2009LeverageCA,
  title={Leverage Constraints and the International Transmission of Shocks},
  author={Michael B. Devereux},
  year={2009}
}
Recent macroeconomic experience has drawn attention to the importance of interdependence among countries through financial markets and institutions, independently of traditional trade linkages. This paper develops a model of the international transmission of shocks due to interdependent portfolio holdings among leverage-constrained investors. In our model, without leverage constraints on investment, financial integration itself has no implication for international macro co-movements. When… CONTINUE READING
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