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Global financial cycles since 1880

Galina Potjagailo and Maik Wolters

Journal of International Money and Finance, 2023, vol. 131, issue C

Abstract: We analyse global aggregate and segment-specific cycles across credit, house prices, equity prices, and interest rates in 17 economies over 130 years using a time-varying dynamic factor model. We show that global financial cycles have gained relevance over time. For equity prices, they now constitute the main driver of fluctuations in most countries. Global cycles in credit and housing have become more pronounced and protracted since the 1980s, and their relevance has increased for a sub-group of financially open and developed economies. Panel regressions show that a country’s susceptibility to global financial cycles tends to increase with financial openness and financial integration, the extent of mortgage-related lending, and the efficiency of stock markets. Understanding changes in global co-movement over time and its heterogeneous role across countries matters for the design of financial stabilization policies.

Keywords: Financial cycles; Financial crisis; Global co-movement; Dynamic factor models; Time-varying parameters; Macro-finance (search for similar items in EconPapers)
JEL-codes: C32 C38 E44 F44 F65 G15 N10 N20 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: Global financial cycles since 1880 (2020) Downloads
Working Paper: Global financial cycles since 1880 (2019) Downloads
Working Paper: Global financial cycles since 1880 (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:131:y:2023:i:c:s0261560623000025

DOI: 10.1016/j.jimonfin.2023.102801

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