Characterizing the financial cycle
evidence from a frequency domain analysis
Published on 28. July 2015
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30 pages
978-3-95729-169-1 (ISBN)
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Description
A growing body of literature argues that the financial cycle is considerably longer in
duration and larger in amplitude than the business cycle and that its distinguishing
features became more pronounced over time. This paper proposes an empirical approach
suitable to test these hypotheses. We parametrically estimate the whole spectrum of
financial and real variables to obtain a complete picture of their cyclical properties. We
provide strong statistical evidence for the US and slightly weaker evidence for the UK
validating the hypothesized features of the financial cycle. In Germany, however, the
financial cycle is, if at all, much less visible.
duration and larger in amplitude than the business cycle and that its distinguishing
features became more pronounced over time. This paper proposes an empirical approach
suitable to test these hypotheses. We parametrically estimate the whole spectrum of
financial and real variables to obtain a complete picture of their cyclical properties. We
provide strong statistical evidence for the US and slightly weaker evidence for the UK
validating the hypothesized features of the financial cycle. In Germany, however, the
financial cycle is, if at all, much less visible.