Global Financial Cycle and Its Determinants: A VECM Approach

Title

Global Financial Cycle and Its Determinants: A VECM Approach

Creator

Malhotra, Shikha; Dhanya, K.A.

Description

The determinants of the global financial cycle are empirically investigated in this study report. The presence of concurrent changes in capital flows, asset prices, and global bank leverage is associated with the Global Financial Cycle (GFCy). According to the research now in publication, the Chicago Board of Exchange's VIX (Volatility Index), which gauges market uncertainty and risk aversion, indicates this cycle. The Federal Reserve's monetary policy decisions are the driving force behind this cycle, and the literature already in existence has examined the ramifications of these decisions. The GFCy and, thus, the financial circumstances of emerging market economies (EMEs) could be impacted by additional global shocks. Other global shocks have the potential to impact the global financial cycle and analysis of the same is required to make the existing literature more robust. Our analysis, which includes a study of identifying the potential global shocks for a period of 23 years data (quarterly), indicates that the global financial cycle is driven by global liquidity and global economic policy uncertainty. VECM, Granger Causality, Impulse Response functions were applied. There is a unidirectional causal relationship between the global financial cycle and global liquidity, as well as a unidirectional relationship between the global financial cycle and global economic policy uncertainty. 2025, Iquz Galaxy Publisher. All rights reserved.

Source

International Research Journal of Multidisciplinary Scope;Volume;6;Issue;2;pp.782-793

Date

01-01-2025

Publisher

Iquz Galaxy Publisher

Subject

Emerging Markets; Global Financial Cycle (Gfcy); Global Liquidity; Global Shocks; Global Uncertainty; Monetary Policy

Coverage

Malhotra S., Christ (Deemed to be) University, Bangalore, India; Dhanya K.A., Christ (Deemed to be) University, Bangalore, India

Rights

All Open Access; Gold Open Access

Relation

ISSN: 2582631X;

Format

online

Language

English

Type

Article

Identifier

https://doi.org/10.47857/irjms.2025.v06i02.03417

https://www.scopus.com/pages/publications/105005639896?origin=resultslist