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Financial Cycles in Asset Markets and Regions

Author

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  • Beirne, John

    (Asian Development Bank Institute)

Abstract

We provide a comprehensive analysis of financial cycles in asset markets and regions. Using a large sample of 38 advanced and emerging economies to enable a comparative assessment, the analysis conforms with the prevailing literature on financial cycles pertaining to advanced economies, but finds that equity market cycles in emerging market economies in Asia, Latin America, and Eastern Europe may be a more useful gauge of the financial cycle compared to cycles in credit and property markets. Similar to more advanced economies, it is found that financial and business cycles in emerging economies are synchronized, albeit partially and with some cross-country heterogeneity. This underscores the importance for policy makers to be vigilant of interlinkages between real and financial sectors, pointing toward a need for carefully designed macroprudential policies. Finally, we find that financial cycles in emerging markets remain vulnerable to global risk aversion in financial markets and spillovers from the United States, thereby reinforcing the importance of continuing to strengthen domestic macroeconomic fundamentals, and develop further local financial sectors through targeted structural reforms.

Suggested Citation

  • Beirne, John, 2019. "Financial Cycles in Asset Markets and Regions," ADBI Working Papers 1052, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:1052
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    Cited by:

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    2. Santander Quino, Camila Miriam, 2022. "Ciclos económicos y financieros: Una aproximación empírica para Bolivia," Documentos de trabajo 1/2022, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
    3. Yildirim, Zekeriya, 2022. "Global financial risk, the risk-taking channel, and monetary policy in emerging markets," Economic Modelling, Elsevier, vol. 116(C).

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    More about this item

    Keywords

    financial cycle; business cycle; emerging markets;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • 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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