The Synchronization of Business Cycles and Financial Cycles in the Euro Area

Abstract : Using a frequency-based filter, I document the existence of a euro-area financial cycle and high- and low-amplitude national financial cycles. Applying concordance and similarity analysis to business and financial cycles, I provide evidence of five empirical regularities: (i) the aggregate euro-area creditto- GDP ratio behaved procyclically in the years preceding euro-area recessions; (ii) financial cycles are less synchronized than business cycles; (iii) business cycle synchronization has increased while financial cycle synchronization has decreased; (iv) financial cycle desynchronization was more pronounced between high-amplitude and low-amplitude countries, especially Germany; (v) high-amplitude countries and Germany experienced divergent leverage dynamics after 2002.
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William Oman. The Synchronization of Business Cycles and Financial Cycles in the Euro Area. International Journal of Central Banking, Bank for International Settlements, 2019, 15 (1), pp.327-362. ⟨hal-02076848⟩

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