Global Financial Cycles Since 1880

48 Pages Posted: 2 Jun 2020

Date Written: May 29, 2020


With the aim to provide a detailed understanding of global financial cycles and their relevance over time, we analyse co-movement in credit, house prices, equity prices, and interest rates across 17 advanced economies over 130 years. Using a time-varying dynamic factor model, we observe global co-movement across financial variables as well as variable-specific global cycles of different lengths and amplitudes. Global cycles have gained relevance over time. For equity prices, they now constitute the main driver of fluctuations in most countries. Global cycles in credit and housing have become much more pronounced and protracted since the 1980s, but their relevance increased for a sub-group of financially open and developed economies only. Panel regressions indicate that a country’s susceptibility to global financial cycles tends to increase with financial openness and financial integration, the extent of mortgage-related lending, and the efficiency of stock markets. Understanding the cross-country heterogeneity in financial market characteristics therefore matters for the design of appropriate financial stabilization policies across countries and sectors.

Keywords: Financial cycles, financial crisis, global co-movement, dynamic factor models, time-varying parameters, macro-finance

JEL Classification: C32, C38, E44, F44, F65, G15, N10, N20

Suggested Citation

Potjagailo, Galina and Wolters, Maik, Global Financial Cycles Since 1880 (May 29, 2020). Bank of England Working Paper No. 867, Available at SSRN: or

Galina Potjagailo (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Maik Wolters

University of Wuerzburg ( email )

Law Faculty
Domerschulstraße 16
Würzburg, DE Bavaria D-97070

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics