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The Missing “Cycle” Part and Other Thoughts on the Global Financial Cycle

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  • Olga Bondarenko

    (National Bank of Ukraine)

Abstract

The paper studies co-movement in capital flows, which gives rise to a phenomenon dubbed the global financial cycle. It first estimates a global common factor in capital flows using a factor model and draws inferences of its quantitative importance. Then the paper studies the cyclical properties of the extracted factor and concludes that, in general, its importance for capital flows is relatively limited. This may suggest that the Mundell-Fleming trilemma (as opposed to dilemma) still describes the trade-off faced by policymakers, and domestic policies play the primary role in maintaining macroeconomic stability.

Suggested Citation

  • Olga Bondarenko, 2020. "The Missing “Cycle” Part and Other Thoughts on the Global Financial Cycle," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 250, pages 15-32.
    • Handle: RePEc:ukb:journl:y:2020:i:250:p:15-32
    DOI: 10.26531/vnbu2020.250.02
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    References listed on IDEAS

    as
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    6. Anindya Banerjee & Massimiliano Marcellino & Igor Masten, 2008. "Forecasting Macroeconomic Variables Using Diffusion Indexes in Short Samples with Structural Change," Working Papers 334, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    factor model; global financial cycle; capital flows; turning points; concordance;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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