For the past few decades, international macroeconomics has postulated the "trilemma": with free capital mobility, independent monetary policies are feasible if and only if exchange rates are floating. The global financial cycle transforms the trilemma into a "dilemma" or an "irreconcilable duo":...

We analyze the workings of the "Global Financial Cycle." We study the effects of monetary policy of the United States, the center country of the international monetary system, on the joint dynamics of the domestic business cycle and international financial variables such as global credit growth,...