Authors: Nina Boyarchenko and Leonardo Elias
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Staff Reports
The Global Credit Cycle
Number 1094
March 2024
March 2024
JEL classification: F30, F44, G15, G12
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.
Author Disclosure Statement(s)
Nina Boyarchenko
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Leonardo Elias
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Leonardo Elias
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Boyarchenko, Nina and Leonardo Elias. 2024. “The Global Credit Cycle.” Federal Reserve Bank of New York Staff Reports, no. 1094, March. https://doi.org/10.59576/sr.1094
Boyarchenko, Nina and Leonardo Elias. 2024. “The Global Credit Cycle.” Federal Reserve Bank of New York Staff Reports, no. 1094, March. https://doi.org/10.59576/sr.1094
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