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Asset Prices, Credit and the Business Cycle

Author

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  • Chen, Xiaoshan
  • Kontonikas, Alexandros
  • Montagnoli, Alberto

Abstract

This paper uses the multivariate unobserved components model with phase shifts to analyse the interaction of interest rates, output, asset prices and credit in the US. We find close linkages amongst cyclical fluctuations in the variables.

Suggested Citation

  • Chen, Xiaoshan & Kontonikas, Alexandros & Montagnoli, Alberto, 2012. "Asset Prices, Credit and the Business Cycle," Stirling Economics Discussion Papers 2012-04, University of Stirling, Division of Economics.
  • Handle: RePEc:stl:stledp:2012-04
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    File URL: http://hdl.handle.net/1893/6456
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    References listed on IDEAS

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    1. Gerlach, Stefan & Peng, Wensheng, 2005. "Bank lending and property prices in Hong Kong," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 461-481, February.
    2. André Lucas & Siem Jan Koopman, 2005. "Business and default cycles for credit risk," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 311-323.
    3. Christian J. Murray, 2003. "Cyclical Properties of Baxter-King Filtered Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 472-476, May.
    4. Claessens, Stijn & Kose, M. Ayhan & Terrones, Marco E., 2012. "How do business and financial cycles interact?," Journal of International Economics, Elsevier, vol. 87(1), pages 178-190.
    5. Siem Jan Koopman & João Valle E Azevedo, 2008. "Measuring Synchronization and Convergence of Business Cycles for the Euro area, UK and US," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(1), pages 23-51, February.
    6. Marco Terrones & Enrique G. Mendoza, 2008. "An Anatomy of Credit Booms; Evidence From Macro Aggregates and Micro Data," IMF Working Papers 08/226, International Monetary Fund.
    7. Gerhard Runstler, 2004. "Modelling phase shifts among stochastic cycles," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 232-248, June.
    8. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-247, July-Sept.
    9. Charles Goodhart & Boris Hofmann, 2008. "House prices, money, credit, and the macroeconomy," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 180-205, spring.
    10. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
    11. Engle, Robert F, 1974. "Band Spectrum Regression," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 1-11, February.
    12. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
    13. Drew Creal & Siem Jan Koopman & Eric Zivot, 2010. "Extracting a robust US business cycle using a time-varying multivariate model-based bandpass filter," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 695-719.
    14. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
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    Citations

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    Cited by:

    1. Fausto Cavalli & Ahmad Naimzada & Nicol`o Pecora & Marina Pireddu, 2018. "Agents' beliefs and economic regimes polarization in interacting markets," Papers 1805.00387, arXiv.org.
    2. Guido Bulligan & Lorenzo Burlon & Davide Delle Monache & Andrea Silvestrini, 2017. "Real and financial cycles: estimates using unobserved component models for the Italian economy," Questioni di Economia e Finanza (Occasional Papers) 382, Bank of Italy, Economic Research and International Relations Area.
    3. Galati, Gabriele & Hindrayanto, Irma & Koopman, Siem Jan & Vlekke, Marente, 2016. "Measuring financial cycles in a model-based analysis: Empirical evidence for the United States and the euro area," Economics Letters, Elsevier, vol. 145(C), pages 83-87.
    4. Ramirez, Francisco, 2013. "The Relationship Between Credit and Business Cycles in Central America and the Dominican Republic," MPRA Paper 50332, University Library of Munich, Germany.
    5. Chan, Joshua C.C. & Grant, Angelia L., 2016. "Fast computation of the deviance information criterion for latent variable models," Computational Statistics & Data Analysis, Elsevier, vol. 100(C), pages 847-859.
    6. Rünstler, Gerhard & Vlekke, Marente, 2016. "Business, housing and credit cycles," Working Paper Series 1915, European Central Bank.
    7. Jasper de Winter & Siem Jan Koopman & Irma Hindrayanto & Anjali Chouhan, 2017. "Modeling the business and financial cycle in a multivariate structural time series model," DNB Working Papers 573, Netherlands Central Bank, Research Department.

    More about this item

    Keywords

    Multivariate Unobserved Components Models; Business Cycles; Credit; Asset Prices;

    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
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G0 - Financial Economics - - General

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