Economics at your fingertips  

Financial Cycles in Europe: Dynamics, Synchronicity and Implications for Business Cycles and Macroeconomic Imbalances

Amat Adarov ()

No 166, wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw

Abstract: Using dynamic factor models and state-space techniques we quantify financial cycles for twenty European countries over the period 1960Q1–2015Q4 capturing imbalances across credit, housing, bond and equity markets. The paper documents the existence of slow-moving and persistent financial cycles for all countries in the sample, many of which also exhibit high cross-country synchronicity. Spillover analysis points at the significant role the global financial cycle and a common latent region-specific factor, the European financial cycle, play in shaping national financial market dynamics. Estimations using Bayesian panel VAR models to assess interactions between external and internal macroeconomic imbalances suggest that financial cycles are an important driver of business cycles and public debt dynamics, with much stronger shock transmission observed in the euro area and systemic European economies. Disclaimer Research for this paper was financed by the Anniversary Fund of the Oesterreichische Nationalbank (Project No. 17044). Support provided by Oesterreichische Nationalbank for this research is gratefully acknowledged.

Keywords: financial cycles; macroeconomic imbalances; financial stability; business cycles; financial spillovers; panel VAR; Bayesian VAR (search for similar items in EconPapers)
JEL-codes: E44 F32 G15 F4 (search for similar items in EconPapers)
Pages: 44 pages including 24 Tables and 15 Figures
Date: 2019-10
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published as wiiw Working Paper

Downloads: (external link) ... alances-dlp-5051.pdf (application/pdf)

Related works:
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:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw Contact information at EDIRC.
Bibliographic data for series maintained by Customer service ().

Page updated 2020-10-06
Handle: RePEc:wii:wpaper:166