Financial cycles across G7 economies: A view from wavelet analysis

Martin Mandler and Michael Scharnagl

No 22/2019, Discussion Papers from Deutsche Bundesbank

Abstract: We analyse the cross-country dimension of financial cycles by studying cyclical co-movements in credit, house prices, equity prices and interest rates across the G7 economies. We use wavelet-based statistics to assess at which frequencies cyclical fluctuations and their crosscountry co-movements are important and how these change over time. We show cycles in interest rates and equity prices to be at least as synchronised as cycles in real GDP while cycles in credit and house prices are less synchronised. As a result, cross-country common cycles in equity prices and long-term interest rates account for a larger share of the volatility of these variables at the country level than common cycles in credit aggregates and house prices. A cluster analysis shows a high degree of similarity in the spectral characteristics of cycles in interest rates and equity prices across all countries but less similarities for cycles in credit and house price. For credit and house price cycles country-specific developments turn out to be more important than the common cross-country cycles.

Keywords: financial cycles; wavelet analysis; cluster analysis; cross-country synchronisation (search for similar items in EconPapers)
JEL-codes: C32 C38 E44 E51 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ban, nep-mac and nep-opm
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Citations: View citations in EconPapers (8)

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Journal Article: Financial cycles across G7 economies: A view from wavelet analysis (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:222019

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