How do financial cycles interact? Evidence from the US and the UK

Till Strohsal, Christian Proaño and Juergen Wolters

No 2015-024, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: Are financial cycles an international phenomenon, and, if so, how do financial cycles interact? This letter provides new evidence for the US and the UK. Considering the properties of the data in both the time and the frequency domains, we find a strong relation between the financial cycles of the US and the UK. US financial cycles have a significant impact on the UK, but not the other way around. The relation is clearly most pronounced for cycles between 8 and 30 years, which is also the frequency range that explains almost all variation of the data.

Keywords: Financial Cycle; Vector Autoregressions; Indirect Spectrum Estimation; Coherency; Granger Causality (search for similar items in EconPapers)
JEL-codes: C22 E32 E44 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2015-024

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