The 2008 financial crisis has highlighted the challenges associated with global financial integration and emphasized the importance of macro financial linkages. Specifi cally it has shown how the real sector (business cycles) can interact with and be amplifi ed by the fi nancial sector, resulting in high procyclicality and a buildup of systemic risk in the fi nancial sector that manifests itself during economic downturns. Although boom-bust cycles in asset prices and credit were observed prior to the recent global crisis, they did not seriously challenge the prevailing paradigm. In the macro...