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Real and Financial Cycles in Euro Area Economies: Results from Wavelet Analysis

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  • Scharnagl Michael

    (Research Department, Deutsche Bundesbank, Frankfurt am Main, Germany)

  • Mandler Martin

    (Directorate General Economics, Deutsche Bundesbank, Wilhelm-Epstein-Strasse 14, D-60431Frankfurt am Main, Germany)

Abstract

We study the within-country dimension of financial cycles in the four largest euro area economies using tools from wavelet analysis. We focus on credit and house price cycles which are most commonly used to represent the financial cycle. With the exception of Germany, the variables contain important common cycles within each country close to the upper bound of business cycle length and beyond which can be interpreted as financial cycles. These cycles are closely linked to domestic cycles in real activity showing financial and real economic cycles as interconnected phenomena. For these common cycles, credit and house prices lag real GDP.

Suggested Citation

  • Scharnagl Michael & Mandler Martin, 2019. "Real and Financial Cycles in Euro Area Economies: Results from Wavelet Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(5-6), pages 895-916, October.
    • Handle: RePEc:jns:jbstat:v:239:y:2019:i:5-6:p:895-916:n:2
    DOI: 10.1515/jbnst-2019-0035
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    References listed on IDEAS

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    Cited by:

    1. Ashe, Sinéad & Egan, Paul, 2023. "Examining financial and business cycle interaction using cross recurrence plot analysis," Finance Research Letters, Elsevier, vol. 51(C).
    2. Martin Mandler & Michael Scharnagl, 2022. "Financial Cycles in Euro Area Economies: A Cross‐Country Perspective Using Wavelet Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(3), pages 569-593, June.
    3. Haertel, Thomas & Hamburg, Britta & Kusin, Vladimir, 2022. "The macroeconometric model of the Bundesbank revisited," Technical Papers 01/2022, Deutsche Bundesbank.
    4. Mandler, Martin & Scharnagl, Michael, 2022. "Financial cycles across G7 economies: A view from wavelet analysis," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    5. Mandler, Martin & Scharnagl, Michael, 2020. "Estimating the effects of the Eurosystem's asset purchase programme at the country level," Discussion Papers 29/2020, Deutsche Bundesbank.
    6. Malgorzata Porada - Rochon, 2020. "The Length of Financial Cycle and its Impact on Business Cycle in Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1278-1290.

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    More about this item

    Keywords

    financial cycles; credit cycles; medium-term business cycles; euro area; wavelet analysis;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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