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Financial Cycles: What? How? When?
Author:
Mr. Marco Terrones
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,
Mr. Ayhan Kose
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Mr. Stijn Claessens
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Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 076
Language:
English
Publication Date:
01 Apr 2011
DOI:
https://doi.org/10.5089/9781455227037.001
ISBN:
9781455227037
ISSN:
1018-5941
Pages:
40
Keywords:
WP; price downturn; equity price; house price; asset price; price upturn
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper provides a comprehensive analysis of financial cycles using a large database covering 21 advanced countries over the period 1960:1-2007:4. Specifically, we analyze cycles in credit, house prices, and equity prices. We report three main results. First, financial cycles tend to be long and severe, especially those in housing and equity markets. Second, they are highly synchronized within countries, particularly credit and house price cycles. The extent of synchronization of financial cycles across countries is high as well, mainly for credit and equity cycles, and has been increasing over time. Third financial cycles accentuate each other and become magnified, especially during coincident downturns in credit and housing markets. Moreover, globally synchronized downturns tend to be associated with more prolonged and costly episodes, especially for credit and equity cycles. We discuss how these findings can guide future research on various aspects of financial market developments.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund