Credit and Business Cycles: An Empirical Analysis in the Frequency Domain

Juan Amador Torres (), Celina Gaitán-Maldonado (), Jose Gomez-Gonzalez and Mauricio Villamizar-Villegas

No 12115, Borradores de Economia from Banco de la Republica

Abstract: The history of economic recessions has shown that every deep downturn has been accompanied by disruptions in the ?financial sector. Paradoxically, up until the ?financial world crisis of 2007-2009, little attention was given to macroeconomic and ?financial interdependence. And, in spite of a renewed interest on the matter, significant effort is still warranted in order to attain a comprehensive understanding of the causal links between the financial sector and the rest of the economy. In this paper we study the relationship between financial and real business cycles for a sample of thirty-three countries in the frequency domain. Specifically, we characterize the interdependence of credit and output cycles and conduct Granger-type causality tests in the frequency domain. We also perform cluster analysis to analyze groups of countries with similar cyclical dynamics. Our main findings indicate that: (i) on average, credit cycles are larger and longer-lasting than output cycles, (ii) the likelihood of cycle interdependence is highest when considering medium-term frequencies (we ?find that that Granger causality runs in both directions), and (iii) emerging markets tend to have cycles of shorter duration but are more profound than those exhibited in developed economies.

Keywords: Frequency domain; Granger causality; hierarchical clustering; credit and out-put cycle interdependence. (search for similar items in EconPapers)
JEL-codes: C38 E32 E44 (search for similar items in EconPapers)
Pages: 46
Date: 2014-09-04
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_843.pdf

Related works:
Journal Article: Credit and business cycles: Causal effects in the frequency domain (2015)
Journal Article: Credit and business cycles: Causal effects in the frequency domain (2015)
Working Paper: Credit and Business Cycles: An Empirical Analysis in the Frequency Domain (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000094:012115

Access Statistics for this paper

More papers in Borradores de Economia from Banco de la Republica
Bibliographic data for series maintained by Clorith Angelica Bahos Olivera ().