Financial Cycles: What? How? When?
IMF Working Papers, April 1, 2011
Source details
- Canonical URL
- Financial Cycles: What? How? When?
Other formats
Bibliographic details
- Authors: Marco Terrones, Ayhan Kose, Stijn Claessens
- Published: April 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455227037.001
Summary
- Comprehensive analysis of financial cycles using a large database covering 21 advanced countries over the period 1960:1-2007:4.
- Cycles analyzed: credit, house prices, and equity prices.
- Three main results are reported concerning duration, synchronization, and interaction/magnification of financial cycles.
- The paper discusses how these findings can guide future research on various aspects of financial market developments.
Main findings
- Financial cycles tend to be long and severe, especially those in housing and equity markets.
- Financial cycles are highly synchronized within countries, particularly credit and house price cycles.
- The extent of synchronization of financial cycles across countries is high as well, mainly for credit and equity cycles, and has been increasing over time.
- Financial cycles accentuate each other and become magnified, especially during coincident downturns in credit and housing markets.
- Globally synchronized downturns tend to be associated with more prolonged and costly episodes, especially for credit and equity cycles.
Data scope and focus
- Sample: 21 advanced countries.
- Sample period: 1960:1-2007:4.
- Asset types examined: credit, house prices, equity prices.
Implications for research and policy guidance
- Findings can guide future research on various aspects of financial market developments, including:
- The long duration and severity of housing and equity cycles warrant further study of their drivers and macroeconomic effects.
- High within-country synchronization between credit and house price cycles suggests joint modeling and monitoring of these indicators.
- Increasing cross-country synchronization of credit and equity cycles points to the importance of cross-border spillovers and international policy coordination.
- The magnification of effects during coincident downturns, notably credit and housing, highlights the need to understand amplification mechanisms and to design policies to mitigate systemic amplification.
- Globally synchronized downturns producing more prolonged and costly episodes indicate value in global surveillance and preemptive measures.
Key statistics and publication identifiers
- Countries covered: 21 advanced countries.
- Period covered: 1960:1-2007:4.
- Pages: 40.
- Volume: 2011.
- Issue: 076.
- Series: Working Paper No. 2011/076.
- DOI: https://doi.org/10.5089/9781455227037.001
- Stock No: WPIEA2011076
- ISBN: 9781455227037
- ISSN: 1018-5941
Marco Terrones, Ayhan Kose, and Stijn Claessens. "Financial Cycles: What? How? When?", April 1, 2011.