How Important is the Global Financial Cycle? Evidence from Capital Flows

  • Eugenio Cerutti
  • Stijn Claessens
  • Andrew K. RoseEmail author
Research Article


We quantify the importance of a Global Financial Cycle (GFCy) for capital flows. We use capital flow data disaggregated by direction and type between 1990Q1 and 2015Q4 for 85 countries, and conventional techniques, models and metrics. Since the GFCy is unobservable, we use two methods to represent it: directly observable variables in center economies often linked to it, such as the VIX, and indirect manifestations, proxied by common dynamic factors extracted from actual capital flows. Our evidence seems mostly inconsistent with a significant and conspicuous GFCy for capital flows; both methods combined rarely explain more than a quarter of the variation for most types of capital flows, in most countries, for most of the time. Succinctly, most variation in capital flows does not seem to be the result of common shocks nor stem from observables in a central country like the USA.

JEL Classification

F32 F36 F65 G15 


Supplementary material

41308_2019_73_MOESM1_ESM.docx (869 kb)
Supplementary material 1 (DOCX 868 kb)


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Copyright information

© International Monetary Fund 2019

Authors and Affiliations

  • Eugenio Cerutti
    • 1
  • Stijn Claessens
    • 2
  • Andrew K. Rose
    • 3
    Email author
  1. 1.IMF Research DepartmentWashingtonUSA
  2. 2.Monetary and Economic DepartmentBISBaselSwitzerland
  3. 3.Berkeley-HaasBerkeleyUSA

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