Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300473 
Year of Publication: 
2024
Series/Report no.: 
Staff Report No. 1094
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Do global credit conditions affect local credit and business cycles? Using a large cross-section of equity and corporate bond market returns around the world, we construct a novel global credit factor and a global risk factor that jointly price the international equity and bond cross-section. We uncover a global credit cycle in risky asset returns, which is distinct from the global risk cycle. We document that the global credit cycle in asset returns translates into a global credit cycle in credit quantities, with a tightening in global credit conditions predicting extreme capital flow episodes and declines in the stock of country-level private debt. Furthermore, global credit conditions predict the mean and left tail of real GDP growth outcomes at the country level. Thus, the global pricing of corporate credit is a fundamental factor in driving local credit conditions and real outcomes.
Subjects: 
global financial cycle
corporate bond returns
return predictability
international capital flows
credit and real activity outcomes
JEL: 
F30
F44
G15
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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