Financial Cycles in Asset Markets and Regions

John Beirne

No 1052, ADBI Working Papers from Asian Development Bank Institute

Abstract: We provide a comprehensive analysis of financial cycles in asset markets and regions. Using a large sample of 38 advanced and emerging economies to enable a comparative assessment, the analysis conforms with the prevailing literature on financial cycles pertaining to advanced economies, but finds that equity market cycles in emerging market economies in Asia, Latin America, and Eastern Europe may be a more useful gauge of the financial cycle compared to cycles in credit and property markets. Similar to more advanced economies, it is found that financial and business cycles in emerging economies are synchronized, albeit partially and with some cross-country heterogeneity. This underscores the importance for policy makers to be vigilant of interlinkages between real and financial sectors, pointing toward a need for carefully designed macroprudential policies. Finally, we find that financial cycles in emerging markets remain vulnerable to global risk aversion in financial markets and spillovers from the United States, thereby reinforcing the importance of continuing to strengthen domestic macroeconomic fundamentals, and develop further local financial sectors through targeted structural reforms.

Keywords: financial cycle; business cycle; emerging markets (search for similar items in EconPapers)
JEL-codes: C38 E32 E44 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-12-09
New Economics Papers: this item is included in nep-fdg, nep-ifn and nep-mac
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Journal Article: Financial cycles in asset markets and regions (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbiwp:1052

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