Global macro-financial cycles and spillovers

Jongrim Ha, Ayhan Kose, Christopher Otrok and Eswar Prasad

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We develop a new dynamic factor model that allows us to jointly characterize global macroeconomic and financial cycles and the spillovers between them. The model decomposes macroeconomic cycles into the part driven by global and country-specific macro factors and the part driven by spillovers from financial variables. We consider cycles in macroeconomic aggregates (output, consumption, and investment) and financial variables (equity and house prices, and interest rates). We find that the global macro factor plays a major role in explaining G-7 business cycles, but there are also spillovers from equity and house price shocks onto macroeconomic aggregates. These spillovers operate mainly through the global macro factor rather than the country-specific macro factors (i.e., these spillovers affect business cycles in all G-7 economies) and are stronger in the period leading up to and following the global financial crisis. We find little evidence of spillovers from macroeconomic cycles to financial cycles.

Keywords: Global business cycles; global financial cycles; common shocks; international spillovers; dynamic factor models (search for similar items in EconPapers)
JEL-codes: C1 C32 E32 F4 (search for similar items in EconPapers)
Pages: 82 pages
Date: 2020-02
New Economics Papers: this item is included in nep-fdg, nep-ifn, nep-mac and nep-opm
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Citations: View citations in EconPapers (10)

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https://cama.crawford.anu.edu.au/sites/default/fil ... e_otrok_prasad_0.pdf (application/pdf)

Related works:
Working Paper: Global Macro-Financial Cycles and Spillovers (2020)
Working Paper: Global Macro-Financial Cycles and Spillovers (2020)
Working Paper: Global Macro-Financial Cycles and Spillovers (2020)
Working Paper: Global Macro-Financial Cycles and Spillovers (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-12

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