Financial and Business Cycles: Shall We Dance?: An Application to Kazakhstan

IMF Working Papers, August 23, 2024

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Canonical URL: Financial and Business Cycles: Shall We Dance?: An Application to Kazakhstan

Author: Gregorio Impavido
Date: August 23, 2024
Core objective: Examine the role of financial cycle proxies in refining available estimates of the business cycle in Kazakhstan.

Introduces a formal test for the stability of the mean of exogenous variables in the estimation set up.
Develops a self-contained statistical package to streamline the whole estimation process.
Empirical strategy is designed to be parsimonious to avoid pitfalls of overly complex models while achieving comparable results.
Focused methodological elements and keywords in the study: cumulative sum test, estimation process, estimation strategy, multivariate filter, HP filter, HP business cycle estimate.

Application: Kazakhstan.
Emphasis on parsimonious model specification and incorporation of financial cycle proxies to refine business cycle estimates.
Financial cycle proxies examined include measures related to credit, house price inflation, and housing prices (as reflected in subject keywords).

Results have implications for:
- The extent with which the authorities should manage the business and financial cycles.
- The choice of policies to address interactions between financial and business cycles.
- Macroprudential policy calibration.
- The usefulness for policymaking of endsample estimates of the cycle.

Subjects: Business cycles, Credit, Economic growth, Financial cycles, Financial sector policy and analysis, Housing prices, Inflation, Money, Prices.
Keywords: B. select literature survey, Business cycle, Business cycles, Credit, cumulative sum test, estimation process, estimation strategy, financial cycle, Financial cycles, Global, house price inflation, Housing prices, HP business cycle estimate, HP filter, Inflation, multivariate filter.