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US monetary policy, the global financial cycle and cross-country financial cycles

Author

Listed:
  • Vrinda Gupta

    (Indian Institute of Technology)

  • Amlendu Dubey

    (Indian Institute of Technology)

Abstract

The literature extensively examines the impact of US monetary policy on global financial cycle; however, it does not show whether specific cross-country financial cycles exist or whether the US monetary policy has any differentiated impact on them. In this paper we investigate the existence of cross-country financial cycles across a group of advanced and emerging market economies for portfolio, FDI and credit inflows and outflows. We find that cross-country financial cycles exist and the impact of US monetary changes on them varies as compared to the impact on global financial cycle. We find that the impact on global financial cycle is more pronounced and lasts longer as compared to impact on cross-country financial cycles. Rather than the US monetary policy which determines global financial cycle, macro-financial linkages between countries determine their cross-country cycles.

Suggested Citation

  • Vrinda Gupta & Amlendu Dubey, 2024. "US monetary policy, the global financial cycle and cross-country financial cycles," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 48(4), pages 999-1019, December.
    • Handle: RePEc:spr:jecfin:v:48:y:2024:i:4:d:10.1007_s12197-024-09680-z
    DOI: 10.1007/s12197-024-09680-z
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    More about this item

    Keywords

    Cross-country financial cycles; Global financial cycle; US monetary policy; Capital flows;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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