Financial Cycles: What? How? When?

41 Pages Posted: 13 Apr 2011

See all articles by M. Ayhan Kose

M. Ayhan Kose

affiliation not provided to SSRN

Stijn Claessens

Bank for International Settlements (BIS)

M. Ayhan Kose

Development Prospects Group at the World Bank

Marco E. Terrones

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2011

Abstract

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.

Keywords: Business cycles, Capital markets, Credit, Demand, Developed countries, Housing prices, Stock prices

Suggested Citation

Kose, M. Ayhan and Claessens, Stijn and Kose, M. Ayhan and Terrones, Marco E., Financial Cycles: What? How? When? (April 2011). IMF Working Papers, Vol. , pp. 1-40, 2011. Available at SSRN: https://ssrn.com/abstract=1808449

M. Ayhan Kose (Contact Author)

affiliation not provided to SSRN

Stijn Claessens

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

M. Ayhan Kose

Development Prospects Group at the World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Marco E. Terrones

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4329 (Phone)

HOME PAGE: http://imf.org/external/np/CV/AuthorCV.aspx?AuthID=171

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