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Singular spectrum analysis for real-time financial cycles measurement

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  • Coussin, Maximilien

Abstract

This paper provides a new statistical methodology based on Singular Spectrum Analysis to extract the cycle component of an economic time series in real-time, addressing several criticisms towards classical ones. I measure the Credit-to-GDP cycles of 21 developed countries and run a horse race to compare it with the Hodrick-Prescott filter, the Hamilton regression filter, the 8-quarters growth rates, a Bartlett window, and variants. The SSA methodology performs best as an Early Warning Indicator for banking vulnerabilities and banking crises up to three years ahead. These conclusions about methodologies have practical implications for the measure of the systemic risk and the conduct of macroprudential policies.

Suggested Citation

  • Coussin, Maximilien, 2022. "Singular spectrum analysis for real-time financial cycles measurement," Journal of International Money and Finance, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:jimfin:v:120:y:2022:i:c:s0261560621001832
    DOI: 10.1016/j.jimonfin.2021.102532
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    More about this item

    Keywords

    Financial cycles; Singular Spectrum Analysis; Early Warning; Real-time; Macroprudential policy;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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