Measuring Financial Cycles in a Model-Based Analysis: Empirical Evidence for the United States and the Euro Area

Tinbergen Institute Discussion Paper 16-029/III

10 Pages Posted: 25 Apr 2016

See all articles by Gabriele Galati

Gabriele Galati

De Nederlandsche Bank

Irma Hindrayanto

De Nederlandsche Bank

Siem Jan Koopman

Vrije Universiteit Amsterdam - School of Business and Economics; Tinbergen Institute; Aarhus University - CREATES

Marente Vlekke

CPB Netherlands Bureau of Economic Policy Analysis

Date Written: April 19, 2016

Abstract

We adopt an unobserved components time series model to extract financial cycles for the United States and the five largest euro area countries over the period 1970 to 2014. We find that credit, the credit-to-GDP ratio and house prices have medium-term cycles which share a few common statistical properties. We show that financial cycles are longer and more ample than business cycles, and that their length and amplitude vary over time and across countries.

Keywords: unobserved components time series model, Kalman filter, maximum likelihood estimation, band-pass filter, medium-term cycles

JEL Classification: C22, C32, E30, E50, E51, G01

Suggested Citation

Galati, Gabriele and Hindrayanto, Irma and Koopman, Siem Jan and Vlekke, Marente, Measuring Financial Cycles in a Model-Based Analysis: Empirical Evidence for the United States and the Euro Area (April 19, 2016). Tinbergen Institute Discussion Paper 16-029/III. Available at SSRN: https://ssrn.com/abstract=2768697 or http://dx.doi.org/10.2139/ssrn.2768697

Gabriele Galati (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Irma Hindrayanto

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Siem Jan Koopman

Vrije Universiteit Amsterdam - School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
+31205986019 (Phone)

HOME PAGE: http://sjkoopman.net

Tinbergen Institute ( email )

Gustav Mahlerplein 117
1082 MS Amsterdam
Netherlands

HOME PAGE: http://personal.vu.nl/s.j.koopman

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

Marente Vlekke

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

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