Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/281065 
Year of Publication: 
2024
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 1/2024
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We study the implications of forging stronger political ties with the US on the sensitivities of stock returns around the world to a global common factor - the global financial cycle. Using voting patterns at the United Nations as a measure of political ties with the US along with various measures of the global financial cycle, we document evidence indicating that stronger political ties with the US amplify the sensitivities of stock returns in developing countries to the global financial cycle. We explore several channels and find that a deepening of financial linkages along with a reduction in information asymmetries and an amplification of sentiment are potentially important factors behind this result.
Subjects: 
Political Ties
Global Financial Cycle
International Spillovers
Stock returns
JEL: 
E44
F30
F50
G15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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