## One Ring to Rule Them All? New Evidence on World Cycles

_IMF Working Papers, September 20, 2019_

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**Canonical URL:** [One Ring to Rule Them All? New Evidence on World Cycles](https://www.imf.org/en/publications/wp/issues/2019/09/20/one-ring-to-rule-them-all-new-evidence-on-world-cycles-48652)

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## Bibliographic details
- Authors: Eric Monnet, Damien Puy
- Published: September 20, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513512969.001

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### Dataset and scope
- New quarterly dataset of output, credit and asset prices assembled using IMF archives.
- Covers a large set of advanced and emerging economies since 1950.
- Variables explicitly studied: output, credit, asset prices (equities and bond yields referenced in keywords).

### Main empirical findings
- World cycles, both real and financial, exist.
- World cycles are generally driven by US shocks.
- The impact of world cycles is modest for most countries.
- The global financial cycle is much weaker when measured using credit rather than asset prices.
- Synchronization trends differ by variable:
  - Prices (goods and assets): synchronization has increased over time.
  - Quantities (output and credit): synchronization has not increased over time.
- Historical comparison:
  - The world business and credit cycles were as strong during Bretton Woods (1950–1972) as during the Globalization period (1984-2006).
- For most countries, the way their output co-moves with the rest of the world has changed little over the last 70 years.

### Interpretation and discussion
- US-originated shocks act as primary drivers of observed world cycles.
- Asset-price-based measures overstate the strength of the global financial cycle compared with credit-based measures.
- The divergence between price synchronization and quantity synchronization implies different transmission mechanisms and possibly differing roles for trade and financial integration over time.

### Policy implications (for small open economies)
- Policy frameworks should account for the modest direct impact of global cycles on most countries, despite strong US influence.
- Reliance on asset-price signals alone may misrepresent the true strength of global financial spillovers; credit dynamics warrant specific monitoring.
- Given limited change over 70 years in output co-movement for most countries, country-specific structural factors remain important for designing policy responses.

*Source: One Ring to Rule Them All? New Evidence on World Cycles, Eric Monnet and Damien Puy, September 20, 2019.*

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_Source: https://www.imf.org/en/publications/wp/issues/2019/09/20/one-ring-to-rule-them-all-new-evidence-on-world-cycles-48652_