Business, housing, and credit cycles

Abstract

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Real and financial cycles: estimates using unobserved component models for the Italian economy

“…Recent studies have also explored the interactions between business and financial cycles either across countries (Claessens, Kose, and Terrones, 2012) or on a country-by-country basis (Galati et al, 2016;Rünstler and Vlekke, 2016). To our knowledge, so far only one paper has proposed a joint dating of business and credit cycles with a specific focus on Italy (Bartoletto et al, 2017), by applying a local turning-point dating algorithm to the level of real GDP and credit aggregates.…”

“…This latter belongs to the class of estimated band-pass filters, which are used to extract cycles falling within a pre-defined band of frequency: usually, 8 to 32 quarters for business cycles and 32 to 120 quarters for financial cycles. However, as stressed by Rünstler and Vlekke (2016), if the filter bands do not overlap, estimates of the two cycles are uncorrelated by construction. This is a restriction one would like to test rather than impose a priori.…”

“…Various sub-samples are also considered, in order to assess the stability of model parameters. We next use the multivariate structural time series model with stochastic cycle introduced by Harvey and Koopman (1997) and, more recently, adopted by both Chen et al (2012) and Rünstler and Vlekke (2016). This allows us to model jointly real GDP and real credit dynamics and to account for interactions between the corresponding estimated cycles.…”

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.…”

“…For more general discussions, see Cogley and Nason (1995), Osborn (1995) and Hamilton (2017). 14 As Rünstler and Vlekke (2016) argue "while Drehmann et al (2012) regard financial and business cycles as 'different phenomena', such finding emerges from their choice of frequency bands for the extraction of GDP (8 to 32 quarters) and financial cycles (32 to 120 quarters): once the filter bands do not overlap, estimates of the two cycles are uncorrelated by construction." where h is a time lag, λ is the frequency (−∞ < λ < ∞), e i = cos( ) + i sin ( ) and i = √ −1 .…”