The Nature of Financial and Real Business Cycles: The Great Moderation and Banking Sector Pro-Cyclicality
AbstractThis paper takes a fresh look at the nature of financial and real business cycles in OECD countries using annual data series and shorter quarterly and monthly economic indicators. It first analyses the main characteristics of the cycle, including the length, amplitude, asymmetry and changes of these parameters during expansions and contractions. It then studies the degree of economic and financial cycle synchronisation between OECD countries but also of economic and financial variables within a given country, and gauges the extent to which cycle synchronisation changed over time. Finally, the paper provides some new evidence on the drivers of the great moderation and analyses the banking sector's pro-cyclicality by using aggregate and bank-level data. The main findings show that the amplitude of the real business cycle was becoming smaller during the great moderation, but asset price cycles were becoming more volatile. In part this was linked to developments in the banking sector which tended to accentuate pro-cyclical behaviour.
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Bibliographic InfoArticle provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.
Volume (Year): 61 (2014)
Issue (Month): 1 (02)
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- Balazs Egert & Douglas Sutherland, 2012. "The Nature of Financial and Real Business Cycles: The Great Moderation and Banking Sector Pro-Cyclicality," CESifo Working Paper Series 3824, CESifo Group Munich.
- Balázs Égert & Douglas Sutherland, 2012. "The nature of financial and real business cycles: The great moderation and banking sector pro cyclicality," EconomiX Working Papers 2012-15, University of Paris West - Nanterre la Défense, EconomiX.
- Balázs Égert & Douglas Sutherland, 2012. "The Nature of Financial and Real Business Cycles: The Great Moderation and Banking Sector Pro-Cyclicality," OECD Economics Department Working Papers 938, OECD Publishing.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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