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Real and financial cycles in the Greek economy

Author

Listed:
  • Hiona Balfoussia

    (Bank of Greece)

  • Dimitris Papageorgiou

    (Bank of Greece)

Abstract

This paper presents estimates of short and medium frequency cycles for eight key economic and financial variables of the Greek economy and explores their characteristics. Five alternative techniques are used: turning point analysis; bandpass filters; the Hodrick-Prescott filter; univariate structural time series models; and multivariate structural time series models. The extracted real and financial cycles are compared by series, methodology and frequency, and their main features and co-movement properties are discussed. The interaction between the business (or real) cycle and the financial cycle is also explored, against the backdrop of the insights gained from the financial crisis. The results indicate that medium frequency fluctuations dominate over business cycle frequency fluctuations for all variables, including GDP, while financial cycles are found to be much longer and exhibit much greater variance than the real GDP cycle. Moreover, the medium frequency cyclical components are highly correlated and their lead-lag behaviour is in line with economic intuition.

Suggested Citation

  • Hiona Balfoussia & Dimitris Papageorgiou, 2018. "Real and financial cycles in the Greek economy," Economic Bulletin, Bank of Greece, issue 47, pages 7-30, July.
    • Handle: RePEc:bog:econbl:y:2018:i:47:p:7-30
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    File URL: https://www.bankofgreece.gr/Publications/econbull201807.pdf
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    More about this item

    Keywords

    business cycle; financial cycle; frequency; synchronicity; filters; structural time series models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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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