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How strong is the link between the global financial cycle and national macro-financial dynamics? A wavelet analysis

Year: 2025

Type: article

Abstract: This paper explores the interaction between the global financial cycle (GFCy) and country-specific macro-financial dynamics. We investigate two alternative measures of the GFCy, the CBOE VIX index and Rey (2013) ’s global factor, and equity prices, house prices, and aggregate credit volume as national variables. By means of a continuous wavelet analysis and a structural VAR framework, we explore such interaction in the frequency and time-domain for 12 countries. Our evidence reveals that a strong and uniform relationship between the global financial cycle and national macro-financial series does exist only in periods of global financial stress. Beyond those times, we find significant variation of the relationship - both across time and countries. The choice of the global financial cycle proxy plays a very limited role only.

Source: Journal of International Money and Finance

DOI: 10.1016/j.jimonfin.2025.103419

Authors: Christian R. Proaño, Leonardo Quero Virla, Till Strohsal

Institutions: University of Bamberg, Berlin School of Economics and Law, Freie Universität Berlin

Language: English

Topic: Global Financial Crisis and Policies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,130

OpenAlex ID: W4413655445

FWCI:

Cites: 41

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Related to: 10