A Study of Financial Cycles and the Macroeconomy in Taiwan
Nan-Kuang Chen () and
MPRA Paper from University Library of Munich, Germany
his paper studies the characteristics of financial cycles (credit and house prices) and their interactions with business cycles in Taiwan. We employ multivariate structural time series model (STSM) to estimate trend and cyclical components in real bank credit, real house prices, and real GDP. We find that financial cycles are roughly twice the length of the business cycles, and house price cycles lead both credit and business cycles. Nevertheless, the estimated length of business and financial cycles in Taiwan is much shorter than those in industrialized economies. We then use machine learning to evaluate the importance of a macroeconomic variable that predicts downturns of financial cycles, by conducting both in-sample fitting and out-of-sample forecasting. Those macro variables selected by machine learning reflects Taiwan's close linkage in trades and financial interdependence with other countries such as China and spillover effects from the Fed's monetary policy.
Keywords: financial cycle; credit; house prices; wavelet analysis; machine learning (search for similar items in EconPapers)
JEL-codes: E32 E37 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-big, nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:101296
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