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Business Cycles, Credit Cycles, and Bank Holdings of Sovereign Bonds: Historical Evidence for Italy 1861-2013

Author

Listed:
  • Silvana Bartoletto

    (University of Naples, "Parthenope")

  • Bruno Chiarini

    (University of Naples, "Parthenope")

  • Elisabetta Marzano

    (University of Naples, "Parthenope" and CESifo)

  • Paolo Piselli

    () (Bank of Italy, DG Economics, Statistics and Research)

Abstract

We propose a joint dating of Italian business and credit cycles on a historical basis by applying a local turning-point dating algorithm to the level of the variables. Along with short cycles corresponding to traditional business cycle fluctuations, we also investigate medium cycles, because there is evidence that financial booms and busts are longer and more persistent than business cycles. After comparing our cycles with the prominent qualitative features of the Italian economy, we carry out some statistical tests for comovement between credit and business cycles and find evidence that credit and business cycles are poorly synchronized, especially in the medium term. Nonetheless, we demonstrate that only for medium-term frequencies the coincidence of financial downturns and economic recessions significantly increases output losses. We do not find evidence that the credit cycle leads the business cycle, both in medium and short-term fluctuations. On the contrary, in the short cycle, we find some evidence that the business cycle leads the credit cycle. Finally, credit and business cycle comovement increases when credit embodies public bonds held by banks, i.e., bank financing to the public sector.

Suggested Citation

  • Silvana Bartoletto & Bruno Chiarini & Elisabetta Marzano & Paolo Piselli, 2017. "Business Cycles, Credit Cycles, and Bank Holdings of Sovereign Bonds: Historical Evidence for Italy 1861-2013," Quaderni di storia economica (Economic History Working Papers) 43, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:workqs:qse_43
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    References listed on IDEAS

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    Cited by:

    1. Valentina Aprigliano & Danilo Liberati, 2019. "Using credit variables to date business cycle and to estimate the probabilities of recession in real time," Temi di discussione (Economic working papers) 1229, Bank of Italy, Economic Research and International Relations Area.
    2. Gallegati, Marco & Giri, Federico & Palestrini, Antonio, 2019. "DSGE model with financial frictions over subsets of business cycle frequencies," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 152-163.
    3. Silvana Bartoletto & Bruno Chiarini & Elisabetta Marzano & Paolo Piselli, 2018. "Banking Crises and Boom-Bust Dynamics: Evidence for Italy (1861-2016)," CESifo Working Paper Series 6972, CESifo.

    More about this item

    Keywords

    business fluctuations; financial cycle; bank credit; medium-term fluctuations;

    JEL classification:

    • 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
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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