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Measuring Financial Cycles in a Model-Based Analysis: Empirical Evidence for the United States and the Euro Area

Author

Listed:
  • Gabriele Galati

    (De Nederlandsche Bank DNB, the Netherlands)

  • Irma Hindrayanto

    (De Nederlandsche Bank DNB, the Netherlands)

  • Siem Jan Koopman

    (VU University Amsterdam, the Netherlands)

  • Marente Vlekke

    (Centraal Planbureau CPB, The Hague, the Netherlands)

Abstract

We adopt an unobserved components time series model to extract financial cycles for the United States and the five largest euro area countries over the period 1970 to 2014. We find that credit, the credit-to-GDP ratio and house prices have medium-term cycles which share a few common statistical properties. We show that financial cycles are longer and more ample than business cycles, and that their length and amplitude vary over time and across countries.

Suggested Citation

  • Gabriele Galati & Irma Hindrayanto & Siem Jan Koopman & Marente Vlekke, 2016. "Measuring Financial Cycles in a Model-Based Analysis: Empirical Evidence for the United States and the Euro Area," Tinbergen Institute Discussion Papers 16-029/III, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20160029
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    References listed on IDEAS

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    More about this item

    Keywords

    unobserved components time series model; Kalman filter; maximum likelihood estimation; band-pass filter; medium-term cycles;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G01 - Financial Economics - - General - - - Financial Crises

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