Discussion Paper Details

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Title: The Global Financial Cycle

Author(s): Silvia Miranda-Agrippino and Hélène Rey

Publication Date: September 2021

Keyword(s): Capital Flows, Commodity cycles, monetary policy spillovers, risk-taking and systemic risk

Programme Area(s): Financial Economics, International Macroeconomics and Finance and Monetary Economics and Fluctuations

Abstract: We review the literature on the empirical characteristics of the global financial cycle and associated stylized facts on international capital flows, asset prices, risk aversion and liquidity in the financial system. We analyse the co-movements of global factors in asset prices and capital flows with commodity prices, international trade and world output as well as the sensitivity of different parts of the world to the Global Financial Cycle. We present evidence of the causal effects of the monetary policies of the US Federal Reserve, the European Central Bank and of the People's Bank of China on the Global Financial Cycle. We then assess whether the 2008 financial crisis has altered the transmission channels of monetary policies on the Global Financial Cycle. Finally, we discuss the theoretical modelling of the Global Financial Cycle and avenues for future research.

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Bibliographic Reference

Miranda-Agrippino, S and Rey, H. 2021. 'The Global Financial Cycle'. London, Centre for Economic Policy Research.