A New Measure of the Financial Cycle: Application to the Czech Republic

Plašil, Miroslav; Seidler, Jakub; Hlaváč, Petr

doi:10.1080/00128775.2016.1192950

Cited by 4 publications

(2 citation statements)

References 14 publications

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“…We use those variables to assess the cyclical behaviour of monetary policy towards four proxies of financial cycles: credit/GDP (credit cycle), debt service ratios (DSR cycle), nominal house prices (NHP cycle) and the natural logarithm of the stock market index (SMI cycle) in each country. Based on the literature, these variables should be considered as adequate financial cycle measures, showing cyclical swings of credit, indebtedness of the economy, real estate cycles and stock market fluctuations (Borio et al 2010;Drehmann -Juselius 2013;Pla sil et al 2016).…”

Section: Methodsmentioning

confidence: 99%

Are interest rate changes comoving with financial cycle?

Smaga

2021

AOecon

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We explore to what extent official interest rate changes can potentially in a procyclical manner impact different financial cycle indicators (credit/GDP, debt service ratio, house prices and stock market indices). We test this on data covering 1995−2016 in 21 countries and the euro area using the Concordance index and Monetary policy procyclicality ratio. Results show that this was not a widespread phenomenon, but there was significant heterogenenity across countries. The procyclicality of interest rate changes was usually higher when financial cycle gaps were increasing and lower when they were decreasing. On average, central banks in several larger economies were running potentially less procyclical monetary policy than those in the smaller ones. The resulting propensity of conflicts between achieving price and financial stability by central banks was low, as only in 10% of the cases the objectives were conflicting (usually when inflation was below the target and the credit cycle was in an expansion phase).

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Section: Methodsmentioning

confidence: 99%

Are interest rate changes comoving with financial cycle?

Smaga

2021

AOecon

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“…The second is that the median of the subindicators entering the FCI calculation corresponds to a kind of "equilibrium" situation where the financial cycle is neither significantly subdued nor overheating. The FCI is constructed using a quadratic system of weights (for more details, see Plašil et al, 2016), so the relationship between the FCI values and the CCyB rate is non-linear. A consequence of this property is that the bands of FCI values are not necessarily of the same width for all the rates, and it does not hold that an increase in the FCI values leads to a proportional change in the rate.…”

Section: Deciding Upon the Ccyb Ratementioning

confidence: 99%

Systemic Risk in Post-Crisis Financial Markets

Frait¹,

Bezvoda²,

Budinský³

et al. 2019

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In response to the global financial crisis (GFC) that started in 2007, both international and national authorities initiated number of regulatory changes. These were addressing primarily the risks generated in the banking sectors and to some extent at the insurance industry and capital market. In particular, the Basel Committee on Banking Supervision (BCBS) introduced number of reforms to the international framework for measuring and mitigating solvency, liquidity, and market risks. Besides regulatory changes for functioning of individual institutions, macroprudential policies were instituted to address systemic risks (for details see Frait et. al (2016). The GCF has had dire consequences for macroeconomic dynamics and stability of global economy, the advanced economies in particular. Weak demand, partially associated with high indebtedness in number of economies, contributed to strong disinflationary pressures. Central banks have responded by exceptionally accommodative policies that created environment of exceptionally low interest rates (Section 1.3). Despite it, economic activity in most advanced economies remained subdued and disinflation pressures persisted. This chapter deals with the potential of adopted policies to create potential sources of systemic risk. It also discusses the risk of Japanisation of European economy and its financial sector (Section 1.2).

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