Global Financial Cycles and Risk Premiums
Oscar Jorda (),
Moritz Schularick (),
Alan M. Taylor () and
Felix Ward ()
Additional contact information
Alan M. Taylor: University of California, Davis, Postal: 1123 SSH, 1 Shields Avenue, Davis, CA 95616, http://economics.ucdavis.edu/people/amtaylor
Felix Ward: University of Bonn
No 2018-5, Working Paper Series from Federal Reserve Bank of San Francisco
This paper studies the synchronization of financial cycles across 17 advanced economies over the past 150 years. The comovement in credit, house prices, and equity prices has reached historical highs in the past three decades. The sharp increase in the comovement of global equity markets is particularly notable. We demonstrate that fluctuations in risk premiums, and not risk-free rates and dividends, account for a large part of the observed equity price synchronization after 1990. We also show that U.S. monetary policy has come to play an important role as a source of fluctuations in risk appetite across global equity markets. These fluctuations are transmitted across both fixed and floating exchange rate regimes, but the effects are more muted in floating rate regimes.
JEL-codes: E50 F33 F42 F44 G12 N10 N20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-his, nep-mac and nep-opm
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Journal Article: Global Financial Cycles and Risk Premiums (2019)
Working Paper: Global financial cycles and risk premiums (2018)
Working Paper: Global Financial Cycles and Risk Premiums (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2018-05
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