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Examining financial and business cycle interaction using cross recurrence plot analysis

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  • Ashe, Sinéad
  • Egan, Paul

Abstract

It is of crucial importance that policymakers understand the level of convergence and synchronicity between the real and financial economy given the financial nature of the 2008 crisis. This paper aims to further such an understanding using recurrence analysis, which is a non-parametric technique frequently used in the sciences. The results suggest that evidence of convergence and syntonisation between the business and financial cycle in the US is visible. The technique presented in this paper has the potential to contribute to policy debates regarding early warning systems (EWS) and macro-financial linkages.

Suggested Citation

  • Ashe, Sinéad & Egan, Paul, 2023. "Examining financial and business cycle interaction using cross recurrence plot analysis," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006377
    DOI: 10.1016/j.frl.2022.103461
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