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Drivers of the Global Financial Cycle

In: NBER International Seminar on Macroeconomics 2024

Author

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  • John Rogers
  • Bo Sun
  • Wenbin Wu

Abstract

Building on literature focused on the role of U.S. monetary policy in driving the global financial cycle, we quantify the relative importance of different shocks in an estimation framework that simultaneously identifies multiple shocks without timing or sign restrictions. Our analysis reveals significant roles for (i) U.S. corporate bond spreads, particularly the excess bond premium component, (ii) U.S. bank leverage, and (iii) the U.S. term premium. We additionally document a feedback loop that leads to significant amplification effects: widening U.S. corporate bond spreads trigger broad declines in global asset prices, which in turn lead to further tightening of U.S. spreads.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • John Rogers & Bo Sun & Wenbin Wu, 2024. "Drivers of the Global Financial Cycle," NBER Chapters, in: NBER International Seminar on Macroeconomics 2024, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:15255
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    as
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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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