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Working Paper
Global Macro-Financial Cycles and Spillovers
We develop a new dynamic factor model to jointly characterize global macroeconomic and financial cycles and the spillovers between them. The model decomposes macroeconomic cycles into the part driven by global and country-specific macro factors and the part driven by spillovers from financial variables. We consider cycles in macroeconomic aggregates (output, consumption and investment) and financial variables (equity and house prices and interest rates). The global macro factor plays a major role in explaining G-7 business cycles, but there are also sizeable spillovers from equity and house ...