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α: calibrated so average coauthorship-adjusted count equals average raw count
We provide evidence on the international transmission of US financial shocks, and compare their effects to monetary policy and central bank information shocks in a two-country SVAR for the US and the UK. Adverse financial shocks trigger a contraction in the US economy and an increase in credit spreads. The tightening in US credit conditions is quickly transmitted internationally, leading to an increase in credit spreads and a slowdown in economic activity in the UK. As for monetary policy and central bank information shocks, cross-country comovement in credit spreads amplifies the impact of financial shocks on the real economy. Our findings support the notion of an ‘international credit channel’ as a key transmission mechanism for cross-country spillovers.