A growing body of literature argues that the financial cycle is considerably longer in duration and larger in amplitude than the business cycle and that its distinguishing features became more pronounced over time. This paper proposes an empirical approach suitable to test these hypotheses. We...

For the timely detection of business-cycle turning points we suggest to use mediumsized linear systems (subset VARs with automated zero restrictions) to forecast the relevant underlying variables, and to derive the probability of the turning point from the forecast density as the probability...

This paper compares alternative estimation procedures for multi-level factor models which imply blocks of zero restrictions on the associated matrix of factor loadings. We suggest a sequential least squares algorithm for minimizing the total sum of squared residuals and a two-step approach based...

We study whether the accuracy of real-time estimates of the output gap produced by the OECD has improved over time by examining a panel dataset on real-time output gap revisions for 15 countries from 1991 Q1 - 2005 Q4. We use a simple panel data regression and a state space model, with common...

We study the cross-country dimension of financial cycles for six euro area countries using three different methodologies: principal component analysis, synchronicity and similarity measures and wavelet analysis. We find that equity prices and interest rates display synchronization across...

Hamilton (2017) criticises the Hodrick and Prescott (1981, 1997) filter (HP filter) because of three drawbacks (i. spurious cycles, ii. end-of-sample bias, iii. ad hoc assumptions regarding the smoothing parameter) and proposes a regression filter as an alternative. I demonstrate that Hamilton's...

The Basel III framework advises considering a reference indicator at the country level to guide the setting of the countercyclical capital buffer: the credit-to-GDP gap. In this paper, I provide empirical evidence suggesting that the credit-to-GDP gap is subject to spurious medium-term cycles,...

We show that one should not use the one-sided Hodrick-Prescott filter (HP-1s) as the real-time version of the two-sided Hodrick-Prescott filter (HP-2s): First, in terms of the extracted cyclical component, HP-1s fails to remove low-frequency fluctuations to the same extent as HP-2s. Second,...

We analyse the cross-country dimension of financial cycles by studying cyclical co-movements in credit, house prices, equity prices and interest rates across the G7 economies. We use wavelet-based statistics to assess at which frequencies cyclical fluctuations and their crosscountry co-movements...