A1367
Title: How strong is the link between the global financial cycle and regional macro-financial dynamics? A wavelet analysis
Authors: Christian Proano - Otto-Friedrich-Universitaet Bamberg (Germany)
Leonardo Quero Virla - Otto-Friedrich-Universitaet Bamberg (Germany) [presenting]
Till Strohsal - Freie Universitaet Berlin (Germany)
Abstract: The interaction between the global financial cycle is explored, proxied by the CBOE VIX index and Rey's global factor of risky asset prices and regional macro-financial dynamics, proxied by equity prices, house prices, and aggregate credit volumes. By means of a continuous wavelet transform and a structural VAR framework, such interaction is explored in the frequency- and time-domain for 23 advanced and emerging countries. The evidence suggests that, beyond periods of global financial stress, there is not a systematic, uniform relationship between the global financial cycle and regional macro-financial dynamics across country groups. Additionally, it is shown that although the two leading measures of the global financial cycle are used interchangeably in the literature, they have a heterogeneous explanatory power regarding the variance of regional dynamics.
