| Abstract: |
This paper assesses the role of financial variables in real economic
fluctuations, in view of analysing the link between financial cycles and
business cycles at the global level. A Global VAR modelling approach is used
to first assess the contribution of credit and asset price variables to real
economic activity in a number of countries and regions. The GVAR model is
based on 38 countries estimated over 1987-2013. An analysis on a sample
excluding the post-financial crisis period is also provided to check whether
financial variables have gained importance in explaining business cycle
fluctuations over the recent past. In a second step, financial shocks are
identified through sign restrictions in order to illustrate how financial and
business cycles could be related. Overall, the paper shows that the importance
of credit and asset price variables in explaining real economic fluctuations
is relatively large, but has not significantly increased since the global
financial crisis. The international transmission of financial shocks on
business cycle fluctuations also tends to be large and persistent. JEL
Classification: E32, E37, E44, E51, F47 |