Does global financial cycle drive systemic risk?

Mikhail Stolbov, Maria Shchepeleva (mshchepeleva@hse.ru) and Gazi Uddin (gazi.salah.uddin@liu.se)
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Maria Shchepeleva: National Research University Higher School of Economics
Gazi Uddin: Linkoping University

Economics Bulletin, 2021, vol. 41, issue 4, 2320-2329

Abstract: The paper studies the relationship between a financial cycle proxy and conditional capital shortfall (SRISK), a popular systemic risk measure, at the global level. Based on causal and directional dependence analyses in the time and time-frequency domains, we find that global financial cycle (GFC) drives SRISK. Besides, the GFC variable appears more useful in forecasting world industrial production. The results emphasize the GFC relevance for monitoring financial stability and forecasting crises relative to narrow systemic risk measures.

Keywords: global financial cycle; systemic risk; Granger causality; forecast (search for similar items in EconPapers)
JEL-codes: C5 G1 (search for similar items in EconPapers)
Date: 2021-12-29
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-21-00802

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