The Global Credit Cycle

Nina Boyarchenko and Leonardo Elias

No 1094, Staff Reports from Federal Reserve Bank of New York

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 percent 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; corporate bond returns; credit risk premia (search for similar items in EconPapers)
JEL-codes: F30 F44 G12 G15 (search for similar items in EconPapers)
Pages: 80
Date: 2024-03-01
New Economics Papers: this item is included in nep-fdg, nep-fmk, nep-ifn and nep-opm
Note: Revised March 2026.
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Citations: View citations in EconPapers (2)

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DOI: 10.59576/sr.1094

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