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The Global Financial Cycle

Author

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  • Rey, Hélène
  • Miranda-Agrippino, Silvia

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.

Suggested Citation

  • Rey, Hélène & Miranda-Agrippino, Silvia, 2021. "The Global Financial Cycle," CEPR Discussion Papers 16580, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16580
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    Cited by:

    1. Beckmann, Joscha & Czudaj, Robert L., 2022. "Exchange rate expectation, abnormal returns, and the COVID-19 pandemic," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 1-25.
    2. Georgiadis, Georgios & Müller, Gernot J. & Schumann, Ben, 2021. "Global risk and the dollar," Working Paper Series 2628, European Central Bank.
    3. Nadezhda Ivanova & Ekaterina Petreneva & Konstantin Styrin & Yulia Ushakova, 2023. "The Effect of US Monetary Policy on the Activities of Russian Banks in the Low Interest Rate Environment," Bank of Russia Working Paper Series wps114, Bank of Russia.
    4. Javier Bianchi & Guido Lorenzoni, 2021. "The Prudential Use of Capital Controls and Foreign Currency Reserves," NBER Working Papers 29476, National Bureau of Economic Research, Inc.
    5. Keddad, Benjamin & Sato, Kiyotaka, 2022. "The influence of the renminbi and its macroeconomic determinants: A new Chinese monetary order in Asia?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    6. Bodart, Vincent & Carpantier, Jean-François, 2023. "Currency crises in emerging countries: The commodity factor," Journal of Commodity Markets, Elsevier, vol. 30(C).
    7. Davis, J. Scott & Zlate, Andrei, 2023. "The global financial cycle and capital flows during the COVID-19 pandemic," European Economic Review, Elsevier, vol. 156(C).
    8. Gamboa-Estrada, Fredy & Romero, José Vicente, 2022. "Common and idiosyncratic movements in Latin-American exchange rates," International Economics, Elsevier, vol. 171(C), pages 174-190.
    9. Malliaropulos, Dimitris & Migiakis, Petros, 2023. "A global monetary policy factor in sovereign bond yields," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 445-465.
    10. Gudjonsson Jon & Hougaard Jensen Svend E., 2023. "Pension Funds and Financial Stability: The Case of the UK Gilt Crisis," Intereconomics: Review of European Economic Policy, Sciendo, vol. 58(3), pages 155-159, June.
    11. Schclarek, Alfredo & Xu, Jiajun, 2022. "Exchange rate and balance of payment crisis risks in the global development finance architecture," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).

    More about this item

    Keywords

    Monetary policy spillovers; Capital flows; Commodity cycles; Risk-taking; Systemic risk;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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