Are business and credit cycles synchronised internally or externally?

Kurowski, Łukasz; Rogowicz, Karol

doi:10.1016/j.econmod.2018.05.009

Cited by 15 publications

(8 citation statements)

References 39 publications

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“…Both approaches, however, do not allow drawing direct conclusions about the common cycle as they do not provide for a means of aggregation. Distance measures and cluster analysis, such as in Aguiar‐Conraria and Soares (2011); Flor and Klarl (2017); Kurowski and Rogowicz (2018) provide information on the similarity of cycles across countries, in other words how ‘close’ their cycles are to each other but they represent averages over the sample period and, thus, do not provide information on time variation.…”

Section: Relation To the Literaturementioning

confidence: 99%

Financial Cycles in Euro Area Economies: A Cross‐Country Perspective Using Wavelet Analysis*

Mandler

Scharnagl

2021

Oxf Bull Econ Stat

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We study the cross-country dimension of financial cycles for six euro area countries using wavelet analysis. Estimated wavelet cohesions show that cycles in equity prices and interest rates display stronger synchronization across countries than real output cycles, whereas credit variables and house prices show lower cross-country synchronization. We propose a wavelet-based extension to the spectral envelope that is similar to a frequency-based time-varying principal component analysis. The country loadings show that, contrary to all other variables, cycles in loans to households and house prices in Germany and the Netherlands are negatively or less strongly correlated with the common cycles.JEL Classification numbers: C32, C38, E44, F36. *This paper represents the authors' personal opinions and does not necessarily reflect the views of the Deutsche Bundesbank or of the Eurosystem. This paper is a substantially revised version of our work on the ECB report Real and financial cycles in EU countries: stylised facts and modelling implications . We are indebted to Davor Kunovac, Gerhard Rünstler and Bruno de Backer for helpful comments and discussions. Parts of this paper have been circulated as a Bundesbank Discussion Paper written with Davor Kunovac, see Kunovac, Mandler and Scharnagl (2018).1 For example, Basel III regulations link counter-cyclical capital buffers to a financial cycle proxy, the deviation of the credit-to-GDP ratio from its long-run trend (e.g. Drehmann and Tsatsaronis, 2014).

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Section: Relation To the Literaturementioning

confidence: 99%

Financial Cycles in Euro Area Economies: A Cross‐Country Perspective Using Wavelet Analysis*

Mandler

Scharnagl

2021

Oxf Bull Econ Stat

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“…In addition to its role in early warning models, the financial cycle concept is used to study the relationship between the real economy and the financial system. According to the research by Kurowski and Rogowicz (2018), the synchronization between financial and business cycles in any given country reached the lowest historical level following the global financial crisis. However, the influence of global factors on domestic financial cycles is growing.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Kalemli-Ozcan, Papaioannou, & Peydr´o, 2009 or Akar, 2017). At the global level, the U.S. financial cycle has the greatest impact on the financial and business cycles of various countries (Kurowski and Rogowicz, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Therefore, the CI indicator is not an entirely good indicator because, as mentioned earlier, the gap levels in this period have opposite signs. To include both cycle features (gap level and its changes) in the cycle synchronization, Kurowski and Rogowicz (2018) proposed a measure called distance index (DI).…”

Section: Financial Cycles Synchronizaionmentioning

confidence: 99%

“…Borio, 2012 or Aikman, Lehnert, Liang, & Modugano, 2016). Another area is the synchronization between the financial cycles of different countries, or the synchronization between the financial and business cycle (e.g., Cleassens, Kose, & Terrones, 2011 or Kurowski and Rogowicz, 2018). This type of approach makes it possible to assess the links between the real and the financial economies from both the internal (in each country) and external (between countries) perspectives.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Financial cycle − A critical analysis of the methodology for its identification

Kurowski

2021

Journal of Central Banking Theory and Practice

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While the legitimacy of the concept of the financial cycle (as distinct from the business cycle) in research and economic policy after the experience of the global financial crisis raises no concerns, the methodology for its application has become a subject of discussion. The purpose of this article is to indicate which research methods dominate in identifying a financial cycle and which methodological traps accompany them. The low level of critical perspective on the methods used to identify cycles often results in conclusions that have no economic justification and may result in erroneous decisions in economic policy and central bank practice. The case study carried out in the article confirms that the key elements in identifying a financial cycle are part of a long-term series covering at least two lengths of the financial cycle. In addition, because the results may be sensitive to the type of filter used, it is important not to rely on a single variable but rather to build indexes that take into account a number of them (including those obtained using filtration methods).

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Is There a Pervasive World Real Credit Cycle?

2023

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This paper analyses the international structure of credit and the potential buildup of a single world cycle using quarterly data for 48 economies between 1985 and 2015. For this analysis, we rely on an approximate factor model and on hard and fuzzy clustering methodologies. The results indicate that, for the whole sample, there are three common components to credit, one of these more pervasive and impacting most countries in the sample, particularly developed ones. One major cluster of countries is identified, but without the presence of both Japan and Germany, thus suggesting that a world real credit cycle is not yet formed. However, we found that the composition of this core cluster has been growing over the years, encompassing more countries and establishing a growing dominance over the credit cycles dynamic, opening the possibility for a single world credit cycle in the future.

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Are business and credit cycles synchronised internally or externally?

Cited by 15 publications

References 39 publications

Financial Cycles in Euro Area Economies: A Cross‐Country Perspective Using Wavelet Analysis*

Financial Cycles in Euro Area Economies: A Cross‐Country Perspective Using Wavelet Analysis*

Financial cycle − A critical analysis of the methodology for its identification

Is There a Pervasive World Real Credit Cycle?

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