Finance-augmented business cycles: A robustness check
Octavio FernÃ¡ndez-Amador (),
Martin GÃ¤chter () and
Friedrich Sindermann ()
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Octavio FernÃ¡ndez-Amador: World Trade Institute, University of Bern
Martin GÃ¤chter: Foreign Research Division, Oesterreichische Nationalbank
Authors registered in the RePEc Author Service: Octavio Fernández-Amador () and
Martin Gächter ()
Economics Bulletin, 2016, vol. 36, issue 1, 132-144
Recent literature has highlighted the importance of considering the financial cycle for the estimation of business cycles. The applied estimation approaches, however, differ widely and cyclical estimates are therefore difficult to compare. In this paper, we assess the robustness of finance-augmented business cycle estimates to different trend specifications for Japan, the UK, and the US. In line with earlier studies, we confirm that the inclusion of financial variables strongly affects the estimates of the business cycle, resulting in larger amplitudes and more persistent dynamics than traditional cycle estimates. While the dynamics of the cyclical component does not depend much on the model used, its amplitude shows strong sensitivity to the underlying assumptions of the trend model.
Keywords: Financial cycle; finance-augmented business cycle; Kalman filter. (search for similar items in EconPapers)
JEL-codes: E3 G0 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-15-00136
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