The Global Credit Cycle

Nina Boyarchenko and Leonardo Elias

No 1094, Staff Reports from Federal Reserve Bank of New York

Abstract: Do global credit conditions affect local credit and business cycles? Using a large cross-section of equity and corporate bond market returns around the world, we construct a novel global credit factor and a global risk factor that jointly price the international equity and bond cross-section. We uncover a global credit cycle in risky asset returns, which is distinct from the global risk cycle. We document that the global credit cycle in asset returns translates into a global credit cycle in credit quantities, with a tightening in global credit conditions predicting extreme capital flow episodes and declines in the stock of country-level private debt. Furthermore, global credit conditions predict the mean and left tail of real GDP growth outcomes at the country level. Thus, the global pricing of corporate credit is a fundamental factor in driving local credit conditions and real outcomes.

Keywords: global financial cycle; corporate bond returns; return predictability; international capital flows; credit and real activity outcomes (search for similar items in EconPapers)
JEL-codes: F30 F44 G12 G15 (search for similar items in EconPapers)
Pages: 70
Date: 2024-03-01
New Economics Papers: this item is included in nep-fdg, nep-fmk, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1094.pdf Full text (application/pdf)
https://www.newyorkfed.org/research/staff_reports/sr1094.html Summary (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:98024

Ordering information: This working paper can be ordered from
pipubs@ny.frb.org

DOI: 10.59576/sr.1094

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli (gabriella.bucciarelli@ny.frb.org).