Working Paper: CEPR ID: DP15958
Authors: Eric Monnet; Damien Puy
Abstract: We estimate world cycles using a new quarterly macro-financial dataset assembled using IMF archives, covering a large set of countries since 1950. World cycles, real and financial, exist and US shocks drive them. But their strength is modest for GDP and credit. Global financial cycles are much weaker for credit than for asset prices. We also challenge the view that synchronization has increased with globalization. Although this is true for prices (goods and assets), it is not for quantities (output and credit). World business and credit cycles were as strong during Bretton Woods (1950-1972) as during the Globalization period (1982-2006). We investigate the economic and financial forces driving our results, connect them to the existing literature and discuss important policy implications.
Keywords: world cycles; business cycles; financial cycles; financial integration; trade integration; globalization; US monetary policy
JEL Codes: E32; F41; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. shocks (N22) | world cycles (F44) |
| world cycles (F44) | domestic output fluctuations (F44) |
| U.S. monetary policy contractions (E49) | world inflation cycles (F44) |
| U.S. monetary policy contractions (E49) | world output cycles (F44) |
| world cycles (F44) | global asset prices (G19) |
| world cycles (F44) | global credit cycles (F44) |
| global financial cycle (F65) | asset prices synchronization (G19) |
| global financial cycle (F65) | credit synchronization (F34) |
| globalization (F60) | synchronization of output and credit cycles (E32) |
| U.S. monetary policy (E52) | domestic credit markets (G21) |