Assessing the Cross-Country Interaction of Financial Cycles: Evidence from a Multivariate Spectral Analysis of the US and the UK
Christian Proaño and
No 182-2017, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute
In recent times, a large number of studies has investigated the empirical properties of financial cycles within countries, mainly based on band-pass filter techniques. The contribution of this paper to the literature is twofold. First, in contrast to most existing studies in the financial cycle literature, we perform a multivariate parametric frequency domain analysis which takes the complete (cross-) spectrum into account and not only certain frequencies. And second, we provide evidence on the cross-country interaction of financial cycles. We focus on the US and UK and use frequency-wise Granger causality analysis as well as structural break tests to obtain three main results. The relation between cycles has recently intensified. There is a significant Granger causality from the US financial cycle to the UK financial cycle, but not the other way around. This relationship is most pronounced for cycles between 8 and 30 years.
Keywords: Financial Cycle; Vector Autoregressions; Indirect Spectrum Estimation; Coherency; Granger Causality (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 (search for similar items in EconPapers)
Pages: 17 pages
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Journal Article: Assessing the cross-country interaction of financial cycles: evidence from a multivariate spectral analysis of the USA and the UK (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:182-2017
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