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How Do Business and Financial Cycles Interact?
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 088
Language:
English
Publication Date:
01 Apr 2011
DOI:
https://doi.org/10.5089/9781455233168.001
ISBN:
9781455233168
ISSN:
1018-5941
Pages:
54
Keywords:
WP; equity price; price bust; house price; credit crunch
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 analyzes the interactions between business and financial cycles using an extensive database of over 200 business and 700 financial cycles in 44 countries for the period 1960:1-2007:4. Our results suggest that there are strong linkages between different phases of business and financial cycles. In particular, recessions associated with financial disruption episodes, notably house price busts, tend to be longer and deeper than other recessions. Conversely, recoveries associated with rapid growth in credit and house prices tend to be stronger. These findings emphasize the importance of developments in credit and housing markets for the real economy.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund