How Do Business and Financial Cycles Interact?

By Stijn Claessens, M. Ayhan Kose, Marco E. Terrones. Social Science Research Network, 2011

828 citations recorded by the source corpus.

This paper analyzes the interactions between business and financial cycles using an extensive database of over 200 business and 700 financial cycles in 44 countries for the period 1960:1-2007:4. Our results suggest that there are strong linkages between different phases of business and financial cycles. In particular, recessions associated with financial disruption episodes, notably house price busts, tend to be longer and deeper than other recessions. Conversely, recoveries associated with rapid growth in credit and house prices tend to be stronger. These findings emphasize the importance of developments in credit and housing markets for the real economy.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/79ec7c3316430c72b9319633612b6743de97c5bc

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Citations in the corpus

Business, Housing and Credit Cycles (2018, methodology): “Studies based on this method conclude that GDP recessions are particularly deep when accompanied by troughs in financial cycles (Claessens et al., 2012).”
Global Liquidity, House Prices, and the Macroeconomy: Evidence from Advanced and Emerging Economies (2015, neutral): “Igan and Loungani (2012), Claessens, Kose, and Terrones (2012), and Cesa-Bianchi (2013) also consider emerging markets in their analyses.”
The credit-to-GDP gap and countercyclical capital buffers: questions and answers (2014, background): “Aikman et al (2010), Claessens et al (2011) and Drehmann et al (2012) document that financial variables (in particular, credit and property prices) have pronounced and largely coincident cycles.”
Analyzing International Business and Financial Cycles using Multi-Level Factor Models: A Comparison of Alternative Approaches (2016, background): “, Stock and Watson (2002a), Stock and Watson (2002b), Eickmeier and Ziegler (2008). For structural macro applications see, e.”
Anchoring Countercyclical Capital Buffers: The Role of Credit Aggregates (2011, background): “Finally, Aikman, Haldane, and Nelson (2010) as well as Claessens, Kose, and Terrones (2011) conclude that financial cycles are longer and more pronounced than business cycles.”
Monetary Policy, Financial Conditions, and Financial Stability (2014, background): “In addition, Claessens, Kose, and Terrones (2012) show that recessions associated with house price or equity price busts tend to be both longer and deeper than other recessions.”