The Global Credit Cycle

Nina Boyarchenko and Leonardo Elias

No 21268, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We estimate the global price of credit risk from a large cross section of global corporate bond returns. We show that a single factor, constructed as a nonlinear function of past credit spreads, equity market volatility, and their interactions, prices bond returns in both the time series and the cross section. The factor significantly outperforms alternative measures of global financial conditions, explaining up to 13% of variation in bond-level three-month-ahead returns. A high global price of credit risk further translates into deteriorations in local credit conditions, outflows from global funds, and higher expected returns to global funds.

Keywords: Global financial cycle; Return predictability (search for similar items in EconPapers)
JEL-codes: F30 G12 G15 (search for similar items in EconPapers)
Date: 2026-03
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