I develop a two country DSGE model with financial intermediation that allows banks to lend to each other across countries. Banks are financially constrained on how much they can borrow. The main goal is to have a framework that can not only capture some aspects of the international transmission of a financial crisis, but can also help explaining the insurance mechanism of the international asset market. I use the model to study the quantitative aspects of a financial crisis and how unconventional monetary policy can help to mitigate the effects of a financial disruption.

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