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

Jasper de Winter*, Siem Jan Koopman, I. Hindrayanto

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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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.

Original languageEnglish
Pages (from-to)57-79
Number of pages23
JournalOxford Bulletin of Economics and Statistics
Issue number1
Early online date2 Sept 2021
Publication statusPublished - Feb 2022

Bibliographical note

Funding Information:
The opinions expressed in this paper are the personal views of the authors, and do not necessarily reflect position of De Nederlandsche Bank. We thank Anjali Chouhan for her excellent contribution to the research which was carried out while she was an intern at the Economics and Research Division of De Nederlandsche Bank. We are grateful to Peter van Els, Gabriele Galati, Jeroen Hessel, Gabriel Pérez‐Quirós and participants at the Workshop on Estimating and Interpreting Financial Cycles (Amsterdam, 2016), the 2nd Policy Research Confere of the European Central Bank Network (Ljubljana, 2016), the Financial Policy Workshop of the Central Bank of Chile (Santiago de Chile, 2016), and the International Symposium on Forecasting (Boulder, 2018) and the editor and two anonymous referees for their valuable comments and suggestions. Koopman acknowledges support from CREATES, Aarhus University, Denmark, funded by the Danish National Research Foundation, (DNRF78).

Publisher Copyright:
© 2021 Oxford University and John Wiley & Sons Ltd.

Copyright 2021 Elsevier B.V., All rights reserved.


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