FINANCIAL CYCLES – THE SYNCHRONIZATION WITH FINANCIAL CRISES

Fluctuations in financial markets have greatly influenced real economy around the world over the past two decades. The 2008–09 global crisis is the latest in a long list of economic events shaped by cycles in financial markets. Its severity has instantly made the study of financial cycles a central topic of research confirming that peaks in the financial cycle are closely associated with systemic banking crises. The paper discusses the causes of economic cycles and their impact on economy, but also the distinct characteristics of financial cycles by considering the close connection between the financial cycle and financial crises. Given the multidimensional interactions between financial and economic cycles, a close monitoring of cycles in financial markets should be an integral part of macroeconomic surveillance and policy design.