Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228215
Authors: 
Scheubel, Beatrice
Stracca, Livio
Tille, Cédric
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2337
Abstract: 
We add to the literature on the influence of the global financial cycle (GFC) and gyrations in capital flows. First, we build a new measure of the GFC based on a structural factor approach, which incorporates theoretical priors in its definition. This measure can also be decomposed in a price-based and quantity-based version of the GFC, which is novel in the literature. Second, we compare our measure to other common existing indicators of the GFC. Third, we estimate the influence of the fluctuations in the GFC on capital flow episodes (sudden stops, ights, retrenchments, surges) and currency crises, also testing for its stability and linearity. We find that the nexus between the GFC and capital flow episodes is generally consistent and not very wobbly. In line with theoretical priors, we find some evidence that the GFC is more important for sudden stops when it is more negative, i.e. the relationship is (mildly) convex, in keeping with a role for occasionally binding constraints, but the evidence for this feature is not strong.
Subjects: 
Capital flows
global financial cycle
push factors
structural factor analysis
JEL: 
F32
F33
F36
F42
F44
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3906-5
Document Type: 
Working Paper

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