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Joint Decomposition of Business and Financial Cycles: Evidence from Eight Advanced Economies

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  • Jasper de Winter
  • Siem Jan Koopman
  • Irma Hindrayanto
Abstract
We discuss a model‐based simultaneous decomposition of multiple time series in short‐term and medium‐term cyclical dynamics. We associate short‐term dynamic features with the business cycle and medium‐term dynamic features with the financial cycle. For eight advanced economies, we analyse a set of macroeconomic and financial time series data. A strong and common finding among all economies is the co‐cyclicality of medium‐term cycles, especially those corresponding to house price and gross domestic product variables. We also find empirical evidence that the house price is partly driven by the credit cycle. Most cyclical movements in the country‐specific time series appear to be driven by domestic rather than global factors.

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  • Jasper de Winter & Siem Jan Koopman & Irma Hindrayanto, 2022. "Joint Decomposition of Business and Financial Cycles: Evidence from Eight Advanced Economies," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(1), pages 57-79, February.
    • Handle: RePEc:bla:obuest:v:84:y:2022:i:1:p:57-79
    DOI: 10.1111/obes.12459
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    Cited by:

    1. Berger, Tino & Richter, Julia & Wong, Benjamin, 2022. "A unified approach for jointly estimating the business and financial cycle, and the role of financial factors," Journal of Economic Dynamics and Control, Elsevier, vol. 136(C).
    2. Xin Tian & Jan Jacobs & Jakob de Haan, 2022. "Alternative Measures for the Global Financial Cycle: Do They Make a Difference?," CESifo Working Paper Series 9730, CESifo.
    3. Shengnan Lv & Zeshui Xu & Xuecheng Fan & Yong Qin & Marinko Skare, 2023. "The mean reversion/persistence of financial cycles: Empirical evidence for 24 countries worldwide," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(1), pages 11-47, March.
    4. Mundra, Sruti & Bicchal, Motilal, 2024. "Financial cycle comovement with monetary and macroprudential policy and global factors: Evidence from India," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    5. Xin Tian & Jan Jacobs & Jakob de Haan, 2022. "Alternative Measures for the Global Financial Cycle: Do They Make a Difference?," CESifo Working Paper Series 9730, CESifo.
    6. Marina Khismatullina & Michael Vogt, 2022. "Multiscale Comparison of Nonparametric Trend Curves," Papers 2209.10841, arXiv.org.

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