The impact of the global financial cycle on systemic risk and the role of macroprudential policies

In an increasingly complex international economic environment, preventing systemic risk requires attention to both domestic conditions and the spillover effects from global financial shocks. This study examines 42 economies to explore the global financial cycle's impact on systemic risk and its transmission mechanisms. The findings reveal that: (1) A downturn in the cycle may increase systemic risk. (2) The impact is stronger in economies with lower financial development, more open capital accounts, and less flexible exchange rate regimes. (3) The cycle induces systemic risk by reducing cross-border capital inflows and amplifying commodity price volatility, with capital flows into the banking sector identified as a key transmission channel. (4) Macroprudential measures mitigate the adverse effects of the global financial cycle on systemic risk, with institution-targeted instruments demonstrating strong effectiveness.