From the Credit Cycle to the Global Financial Cycle: A Literature Review

Abstract

This paper presents an overview of studies on credit, financial, and global financial cycles in macroeconomics. For the first time, the synthesis and critical analysis cover not only foundational studies, but also important subsequent papers with practical relevance for economic policy, including both English- and Russian-language seminal research. Definitions of the credit and financial cycles, methods of identification, and their relationship with the real economy are reviewed, as well as the evolution of scientific concepts from the credit cycle to the financial and global financial cycles. Special attention is paid to the methodological constraints of existing research, particularly for emerging market economies. It is shown that despite the well-established relationship between financial indicators and the business cycle, a universal set of variables and a unified methodology for macroeconomic forecasting based on the financial cycle indicators have not yet been developed and may be unattainable. The paper identifies gaps in the available literature and possible directions for future research.