Global financial cycles since 1880

  • We analyze cyclical co-movement in credit, house prices, equity prices, and longterm interest rates across 17 advanced economies. Using a time-varying multi-level dynamic factor model and more than 130 years of data, we analyze the dynamics of co-movement at different levels of aggregation and compare recent developments to earlier episodes such as the early era of financial globalization from 1880 to 1913 and the Great Depression. We find that joint global dynamics across various financial quantities and prices as well as variable-specific global co-movements are important to explain fluctuations in the data. From a historical perspective, global co-movement in financial variables is not a new phenomenon, but its importance has increased for some variables since the 1980s. For equity prices, global cycles play currently a historically unprecedented role, explaining more than half of the fluctuations in the data. Global cycles in credit and housing have become much more pronounced and longer, but their importance in explaining dynamics has only increased for some economies including the US, the UK and Nordic European countries. We also include GDP in the analysis and find an increasing role for a global business cycle.

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Metadaten
Author:Galina Potjagailo, Maik Hendrik WoltersORCiDGND
URN:urn:nbn:de:hebis:30:3-500567
URL:https://www.imfs-frankfurt.de/fileadmin/user_upload/IMFS_WP/IMFS_WP_132.pdf
Parent Title (English):Working paper series / Institute for Monetary and Financial Stability ; 132
Series (Serial Number):Working Paper Series : Institute for Monetary and Financial Stability (132)
Publisher:Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2019
Year of first Publication:2019
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2019/04/30
Tag:dynamic factor models; financial crisis; financial cycles; global co-movement; macro-finance; time-varying parameter
Issue:March 26, 2019
Page Number:47
HeBIS-PPN:449320790
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C3 Multiple or Simultaneous Equation Models / C32 Time-Series Models; Dynamic Quantile Regressions (Updated!)
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht