Temporal homogeneity between financial stress and the economic cycle

Leroi Raputsoane

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyses the homogeneity of temporal variations between the economic and financial cycles in South Africa. This is achieved by identifying the similarity of cyclical and volatility regime changes between the indicator of financial stress and the economic cycle. The results show that periods of moderate growth in financial stress coincide with periods of similar growth in the economic cycle whereas the periods of high growth in financial stress coincide with periods of low growth in the economic cycle. The results further show that the periods of low volatility of financial stress coincide with periods of similar volatility of the economic cycle and that the periods of high volatility of financial stress coincide with periods of similar volatility of the economic cycle with the exception of the period following the US war on terror where the volatility of the economic cycle remained low despite high volatility of financial stress. Although the results show that the cyclical regime shifts of financial stress occur earlier than those of the economic cycle, they do not conclusively show whether or not the volatility regime changes of financial stress occur earlier or later than those of the economic cycle perhaps on data frequency.

Keywords: Economic cycle; Financial stress; Change point analysis (search for similar items in EconPapers)
JEL-codes: C13 E32 G12 (search for similar items in EconPapers)
Date: 2018-12-31
New Economics Papers: this item is included in nep-mac
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