ECB Occasional Paper No. 205, ISBN: 978-92-899-3364-3
Number of pages: 68Posted: 11 Jan 2018
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Real and Financial Cycles in EU Countries - Stylised Facts and Modelling Implications
ECB Occasional Paper No. 2018/205
Number of pages: 68Posted: 09 Oct 2021
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Date Written: January 1, 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.
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 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 1, 2018). ECB Occasional Paper No. 2018/205, Available at SSRN: https://ssrn.com/abstract=3939314 or http://dx.doi.org/10.2139/ssrn.3939314
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