Measuring real and financial cycles in Luxembourg: An unobserved components approach

Paolo Guarda and Alban Moura

No 126, BCL working papers from Central Bank of Luxembourg

Abstract: We use unobserved components time series models to extract real and financial cycles for Luxembourg over the period 1980Q1-2018Q2. We find that financial cycles are longer and have larger amplitude compared to standard business cycles. Furthermore, financial cycles are highly correlated with cycles in GDP. We compare our results to other approaches to measure financial cycles and show how unobserved components models can serve to evaluate uncertainty and to monitor cyclical developments in real time. Overall, our estimates indicate that in mid 2018 both real and financial cycles in Luxembourg were close to zero, with financial conditions near their long-run trend.

Keywords: Financial cycles; unobserved component time series models; Luxembourg. (search for similar items in EconPapers)
JEL-codes: C22 C32 E30 E50 G01 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2019-03
New Economics Papers: this item is included in nep-eec, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp126

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