US credit constraints heighten global propagation of financial shocks, researchers argue

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US financial shocks are associated with a significant contraction in global economic activity

Financial shocks in the US are much more significant for the global economy when credit in the US domestic economy is constrained, a working paper published by the European Central Bank argues.

In Credit constraints and the international propagation of US financial shocks, Norbert Metiu, Björn Hilberg and Michael Grill investigate whether "credit constraints in the US economy amplify the international propagation of US financial shocks".

The authors use a threshold vector autoregression model

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