International transmission of bubble crashes in a two-country overlapping generations model

Introduction to international financial markets and banking systems crises

“…Ventura [41], and Martin and Ventura [34]). In the paper contained in this special section, Clain-Chamosset-Yvrard and Kamihigashi [12] study the international transmission of bubble crashes by analyzing stationary sunspot equilibria in a two-country version of the overlapping generations exchange economy with stochastic bubbles initially developed by Weil [42]. Both countries, called "home" and "foreign", have symmetric fundamentals with a unique consumption good consumed worldwide and an intrinsically useless asset, i.e.…”

“…Starting with this observation, another financial friction is added (no-commitment) and its implications for macroeconomic instability are studied within a stochastic continuous-time model with some peculiar (and therefore nontrivial) features. The third contribution to the special section, Clain-Chamosset-Yvrard and Kamihigashi [12], focuses on the international transmission of sunspot fluctuations. Although there exists an early literature analyzing the role of globalization and market integration in crisis contagion phenomena, including the spread of waves of pessimistic expectations as in the last Great recession, there is no piece of work shedding light on the consequences of the bursting of an asset bubble in one country on the financial markets in other countries.…”

Regime-Switching Sunspot Equilibria in a One-Sector Growth Model with Aggregate Decreasing Returns and Small Externalities

“…See Clain-Chamosset-Yvrard andKamihigashi (2015) for regime-switching sunspot equilibria in a two-country model with asset bubbles.3 It is shown inKamihigashi (2015) that multiple steady states are possible eve without externalities.…”