Showing 1 - 10 of 16
We introduce a methodology to characterise financial cycles combining a novel multivariate spectral approach to identifying common cycle frequencies across a set of indicators, and a time varying aggregation emphasising systemic developments. The methodology is applied to 13 European Union...
Persistent link: https://www.econbiz.de/10013014965
Persistent link: https://www.econbiz.de/10012392221
Failing to account for joint dynamics of credit and asset prices can be hazardous for countercyclical macroprudential policy. We show that composite financial cycles, emphasising expansions and contractions common to credit and asset prices, powerfully predict systemic banking crises. Further,...
Persistent link: https://www.econbiz.de/10011976914
We introduce a methodology to characterise financial cycles combining a novel multivariate spectral approach to identifying common cycle frequencies across a set of indicators, and a time varying aggregation emphasising systemic developments. The methodology is applied to 13 European Union...
Persistent link: https://www.econbiz.de/10015297765
Hamilton (2017) criticises the HP filter because of three drawbacks (i. spurious cycles, ii. end-of-sample bias, iii. ad hoc assumptions regarding the smoothing parameter) which, moreover, apply to other popular time series filters as well. As an alternative filter, he proposes a regression...
Persistent link: https://www.econbiz.de/10012889196
I show that the detrending of financial variables with the Hodrick and Prescott (1981, 1997) (HP) and band-pass filters leads to spurious cycles. I find that distortions become especially severe when considering medium-term cycles, i.e., cycles that exceed the duration of regular business...
Persistent link: https://www.econbiz.de/10012923312
The Basel III framework advises considering a reference indicator at the country level to guide the setting of the countercyclical capital buffer: the credit-to-GDP gap. In this paper, I provide empirical evidence suggesting that the credit-to-GDP gap is subject to spurious medium-term cycles,...
Persistent link: https://www.econbiz.de/10012833525
We show that one should not use the one-sided Hodrick-Prescott filter (HP-1s) as the real-time version of the two-sided Hodrick-Prescott filter (HP-2s): First, in terms of the extracted cyclical component, HP-1s fails to remove low-frequency fluctuations to the same extent as HP-2s. Second,...
Persistent link: https://www.econbiz.de/10012836334
The Basel III framework advises considering a reference indicator at the country level to guide the setting of the countercyclical capital buffer: the credit-to-GDP gap. In this paper, I provide empirical evidence suggesting that the credit-to-GDP gap is subject to spurious medium-term cycles,...
Persistent link: https://www.econbiz.de/10012838830
Hamilton (2018) proposes a regression filter (Hamilton filter) as an alternative to the Hodrick-Prescott filter (HP filter). Using frequency domain analysis, among others, I show that the Hamilton filter improves on the HP filter, because it does not induce spurious cycles and it has a smaller...
Persistent link: https://www.econbiz.de/10012838908