American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Leaning against the Global Financial Cycle
American Economic Journal: Macroeconomics
(pp. 200–227)
Abstract
We investigate the impact of institutional quality on shielding emerging economies from the global financial cycle. Our findings indicate that countries with a higher rule of law, characterized by superior contract enforcement and more robust protection of property rights, experience a less severe tightening of domestic financial and macroeconomic conditions when faced with adverse global financial shocks. We explain this outcome through a simplified model that incorporates financial frictions, showing how strong institutions and effective governance alleviate collateral constraints and mitigate the effects of global financial pressures on the domestic economy.Citation
Ferrero, Andrea, Maurizio Michael Habib, Livio Stracca, and Fabrizio Venditti. 2026. "Leaning against the Global Financial Cycle." American Economic Journal: Macroeconomics 18 (4): 200–227. DOI: 10.1257/mac.20220388Additional Materials
JEL Classification
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- F32 Current Account Adjustment; Short-term Capital Movements
- F65 Economic Impacts of Globalization: Finance
- K11 Property Law
- K12 Contract Law
- P14 Capitalist Systems: Property Rights