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Mikhail Stolbov, Maria Shchepeleva and Gazi Salah Uddin
''Does global financial cycle drive systemic risk?''
( 2021, Vol. 41 No.4 )
The paper studies the relationship between a financial cycle proxy and conditional capital shortfall (SRISK), a popular systemic risk measure, at the global level. Based on causal and directional dependence analyses in the time and time-frequency domains, we find that global financial cycle (GFC) drives SRISK. Besides, the GFC variable appears more useful in forecasting world industrial production. The results emphasize the GFC relevance for monitoring financial stability and forecasting crises relative to narrow systemic risk measures.
Keywords: global financial cycle, systemic risk, Granger causality, forecast
JEL: G1 - General Financial Markets
C5 - Econometric Modeling: General
Manuscript Received : Aug 25 2021 Manuscript Accepted : Dec 29 2021

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