US monetary policy, the global financial cycle and cross-country financial cycles

Vrinda Gupta () and Amlendu Dubey ()
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Vrinda Gupta: Indian Institute of Technology
Amlendu Dubey: Indian Institute of Technology

Journal of Economics and Finance, 2024, vol. 48, issue 4, No 3, 999-1019

Abstract: Abstract The literature extensively examines the impact of US monetary policy on global financial cycle; however, it does not show whether specific cross-country financial cycles exist or whether the US monetary policy has any differentiated impact on them. In this paper we investigate the existence of cross-country financial cycles across a group of advanced and emerging market economies for portfolio, FDI and credit inflows and outflows. We find that cross-country financial cycles exist and the impact of US monetary changes on them varies as compared to the impact on global financial cycle. We find that the impact on global financial cycle is more pronounced and lasts longer as compared to impact on cross-country financial cycles. Rather than the US monetary policy which determines global financial cycle, macro-financial linkages between countries determine their cross-country cycles.

Keywords: Cross-country financial cycles; Global financial cycle; US monetary policy; Capital flows (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s12197-024-09680-z

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