Measuring Financial Cycles in a Model-Based Analysis: Empirical Evidence for the United States and the Euro Area

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe adopt an unobserved components time series model to extract financial cycles for the United States and the five largest euro area countries over the period 1970 to 2014. We find that credit, the credit-to-GDP ratio and house prices have medium-term cycles which share a few common statistical properties. We show that financial cycles are longer and more ample than business cycles, and that their length and amplitude vary over time and across countries.

Medium-Term Asymmetric Fluctuations and EMU as an Optimum Currency Area

“…This is closely related to the so-called …nancial cycle, which is thought to have a higher amplitude and longer duration than normal business cyles, and which has become more important due to …nancial liberalization (Borio, 2012). So far, …nancial cycles have mainly been derived from …nancial variables only (Galati et al, 2016). Several papers …nd some relation with ‡uctuations in GDP (Drehman et al, 2012), while a few studies …nd more systematic relationships.…”

The Benefits Are at the Tail: Uncovering the Impact of Macroprudential Policy on Growth-At-Risk

“…A concern that may arise with the inclusion of macroprudential policy in the models is that it is potentially endogenous to future GDP growth. That is, although financial and business cycles have been identified to have different lengths Galati et al, 2016) and macroprudential policies are intended to respond to the former, macroprudential authorities may take decisions on these instruments using prospective information and expectations on the business cycle. In this context, macroprudential measures taken by national authorities might be dependent on those expectations, arising an endogeneity problem.…”

Measuring the Financial Cycle in South Africa

“…The statistical approach uses the state space form, with the components being obtained from the Kalman filter and smoother. Lucas and Koopman (2005), Galati et al (2016), Rünstler and Vlekke (2016) and Grinderslev et al (2017) have used unobserved components time series models (UCTSMs) to measure financial cycles.…”