Currency crisis transmission through international trade |
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Authors: | Jamal Ibrahim Haidar |
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Institution: | The World Bank, United States; Paris School of Economics, France; University of Paris 1 Panthéon-Sorbonne, France |
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Abstract: | The Eurozone recent crisis has shown how balance of payments problems in less developed European Monetary Union (EMU) member countries can affect EMU trading partners, spreading the crisis to a larger group of countries. This paper introduces a three-country dynamic general equilibrium model to analyze whether and how terms of trade effects can generate a spillover effect or a currency crisis transmission between countries. Specifically, using a two period model, it incorporates world market clearing conditions for tradables into a new theoretic model, analyzes net capital flow movements between countries, and establishes cross-border macroeconomic linkages. This paper shows how a currency crisis can transmit through the real (trade) sector channel of the economy. |
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Keywords: | E1 E5 F1 F3 F4 |
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