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Real and financial cycles in EU countries - Stylised facts and modelling implications

Gerhard Rünstler (), Hiona Balfoussia, Lorenzo Burlon (), Ginters Buss (), Mariarosaria Comunale, Bruno De Backer (), Hans Dewachter, Paolo Guarda, Markus Haavio, Irma Hindrayanto, Nikolay Iskrev (), Ivan Jaccard (), Dmitry Kulikov, Davor Kunovac, Črt Lenarčič (), Matthieu Lequien, Matija Lozej, Martin Mandler (), Dimitris Papageorgiou (), Jesper Pedersen, Gabriel Perez-Quiros, Ansgar Rannenberg (), Eyno Rots, Michael Scharnagl and Peter Welz
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

No 205, Occasional Paper Series from European Central Bank

Abstract: This paper studies the cyclical properties of real GDP, house prices, credit, and nominal liquid financial assets in 17 EU countries, by applying several methods to extract cycles. The estimates confirm earlier findings of large medium-term cycles in credit volumes and house prices. GDP appears to be subject to fluctuations at both business-cycle and medium-term frequencies, and GDP fluctuations at medium-term frequencies are strongly correlated with cycles in credit and house prices. Cycles in equity prices and long-term interest rates are considerably shorter than those in credit and house prices and have little in common with the latter. Credit and house price cycles are weakly synchronous across countries and their volatilities vary widely – these differences may be related to the structural properties of housing and mortgage markets. Finally, DSGE models can replicate the volatility of cycles in house and equity prices, but not the persistence of house price cycles. JEL Classification: C32, E32, E44

Keywords: DSGE models; financial cycles; real-time estimates; synchronicity (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-mac and nep-ure
Note: 339116
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Handle: RePEc:ecb:ecbops:2018205