Abstract
This paper examines the effects of adopting unconventional policies in a crisis environment characterised by the international transmission of negative financial intermediation and real capital quality shocks. Using a two-country model with financial frictions, we compare adjustments in both countries. We condition one country to adopt a credit easing rule as the monetary regime, regardless of the source of the crisis. We consider results when the other country does nothing, or implements a fiscal (tax-rate) policy rule. Our results show that when both countries experience massive asymmetric shocks, the adoption of optimal policy rules can be used effectively to mitigate negative consequences for both economies. However if the crisis events are due to similar shocks, unconventional monetary policy or fiscal policy can improve conditions in own country, whilst worsening economic conditions in the other country, generating beggar-thy-neighbor growth outcomes.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
