Real and Financial Cycles in EU Countries: Stylised Facts and Modelling Implications

68 Pages Posted: 11 Jan 2018  

Gerhard Rünstler

European Central Bank

Hiona Balfoussia

Bank of Greece

Lorenzo Burlon

Bank of Italy

Ginters Buss

Bank of Latvia

Mariarosaria Comunale

Bank of Lithuania - Economics Department

Bruno De Backer

National Bank of Belgium

Hans Dewachter

Catholic University of Leuven (KUL) - Department of Economics; Erasmus Research Institute of Management (ERIM)

Paolo Guarda

Banque Centrale du Luxembourg

Markus Haavio

Bank of Finland - Research

Irma Hindrayanto

De Nederlandsche Bank

Nikolay I. Iskrev

Bank of Portugal - Economic Research Department; UECE - Research Unit on Complexity in Economics

Ivan Jaccard

European Central Bank (ECB) - Directorate General Research

Dmitry Kulikov

Bank of Estonia

Davor Kunovac

Croatian National Bank

Črt Lenarčič

Bank of Slovenia

Matthieu Lequien

National Institute of Statistics and Economic Studies (INSEE)

Matija Lozej

University of Primorska; Central Bank of Ireland

Martin Mandler

Deutsche Bundesbank - Economics Department; University of Giessen - Department of Economics

Dimitris Papageorgiou

Bank of Greece

Jesper Pedersen

National Bank of Denmark

Gabriel Perez-Quiros

Banco de España

Ansgar Rannenberg

Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK)

Eyno Rots

Magyar Nemzeti Bank

Michael Scharnagl

Deutsche Bundesbank

Peter Welz

European Central Bank

Date Written: January 9, 2018

Abstract

This paper studies the cyclical properties of real GDP, house prices, credit, and nominal liquid financial assets in 17 EU countries, by applying several methods to extract cycles. The estimates confirm earlier findings of large medium-term cycles in credit volumes and house prices. GDP appears to be subject to fluctuations at both business-cycle and medium-term frequencies, and GDP fluctuations at medium-term frequencies are strongly correlated with cycles in credit and house prices. Cycles in equity prices and long-term interest rates are considerably shorter than those in credit and house prices and have little in common with the latter. Credit and house price cycles are weakly synchronous across countries and their volatilities vary widely – these differences may be related to the structural properties of housing and mortgage markets. Finally, DSGE models can replicate the volatility of cycles in house and equity prices, but not the persistence of house price cycles.

Keywords: financial cycles, synchronicity, real-time estimates, DSGE models

JEL Classification: C32, E32, E44

Suggested Citation

Rünstler, Gerhard and Balfoussia, Hiona and Burlon, Lorenzo and Buss, Ginters and Comunale, Mariarosaria and De Backer, Bruno and Dewachter, Hans and Guarda, Paolo and Haavio, Markus and Hindrayanto, Irma and Iskrev, Nikolay I. and Jaccard, Ivan and Kulikov, Dmitry and Kunovac, Davor and Lenarčič, Črt and Lequien, Matthieu and Lozej, Matija and Mandler, Martin and Papageorgiou, Dimitris and Pedersen, Jesper and Perez-Quiros, Gabriel and Rannenberg, Ansgar and Rots, Eyno and Scharnagl, Michael and Welz, Peter, Real and Financial Cycles in EU Countries: Stylised Facts and Modelling Implications (January 9, 2018). ECB Occasional Paper No. 205, ISBN: 978-92-899-3364-3. Available at SSRN: https://ssrn.com/abstract=3099464

Gerhard Rünstler (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Hiona Balfoussia

Bank of Greece ( email )

21 E. Venizelos Avenue
GR-10250 Athens
Greece

Lorenzo Burlon

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Ginters Buss

Bank of Latvia ( email )

Riga, 1050
United States

Mariarosaria Comunale

Bank of Lithuania - Economics Department ( email )

Totoriu 4
Vilnius, LT-01121
Lithuania

Bruno De Backer

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Hans Dewachter

Catholic University of Leuven (KUL) - Department of Economics ( email )

Center for Economic Studies
Naamsestraat 69
Leuven, B-3000
Belgium
+0032 16 326859 (Phone)
+0032 16 326796 (Fax)

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Paolo Guarda

Banque Centrale du Luxembourg ( email )

2, boulevard Royal
Luxembourg, L-2983
Luxembourg

Markus Haavio

Bank of Finland - Research ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

Irma Hindrayanto

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Nikolay I. Iskrev

Bank of Portugal - Economic Research Department ( email )

R. do Ouro, 27
Lisboa, 1100-150
Portugal

UECE - Research Unit on Complexity in Economics ( email )

ISEG/UTL, Rua Miguel Lupi 20
Lisboa, 1249-078
Portugal
+351213925912 (Phone)
+351213971196 (Fax)

HOME PAGE: http://www.iseg.utl.pt/~uece/

Ivan Jaccard

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Dmitry Kulikov

Bank of Estonia ( email )

Estonia Building 13
15095 Tallinn
Estonia

Davor Kunovac

Croatian National Bank ( email )

Croatia

Črt Lenarčič

Bank of Slovenia ( email )

Slovenska cesta 35
Slovenija, 1505
Slovenia

Matthieu Lequien

National Institute of Statistics and Economic Studies (INSEE) ( email )

18, Boulevard Adolphe-Pinard
92244 Malakoff Cedex
France

Matija Lozej

University of Primorska ( email )

Glagoljaska 8
Koper, SI-6000
Slovenia

Central Bank of Ireland ( email )

Dame Street
Dublin, 2
Ireland

Martin Mandler

Deutsche Bundesbank - Economics Department ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

University of Giessen - Department of Economics ( email )

Licher Str. 62
Giessen, Hessen D-35394
Germany

Dimitris Papageorgiou

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

Jesper Pedersen

National Bank of Denmark ( email )

Havnegade 5
DK-1093 Copenhagen K
Denmark

Gabriel Perez-Quiros

Banco de España ( email )

Madrid 28014
Spain

Ansgar Rannenberg

Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK) ( email )

Hans-Böckler-Straße 39
40476 Düsseldorf
Germany

Eyno Rots

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

Michael Scharnagl

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Peter Welz

European Central Bank ( email )

Kaiserstrasse 29
Frankfurt am Main, DE D-60311
Germany

HOME PAGE: http://www.ecb.int

Register to save articles to
your library

Register

Paper statistics

Downloads
64
rank
315,136
Abstract Views
241
PlumX