Title: Financial cycles across G7 countries: A view from wavelet analysis
Authors: Michael Scharnagl - Deutsche Bundesbank (Germany) [presenting]
Martin Mandler - Deutsche Bundesbank (Germany)
Abstract: The cross-country dimension of financial cycles is analyzed by studying cyclical co-movements in financial variables and house prices across the G7 economies. We use wavelet-based statistics to assess at which frequencies cyclical fluctuations and their cross-country co-movements are important and how these change over time. We show cycles in interest rates and equity prices to be at least as synchronised as cycles in real GDP while cycles in credit and house prices are less synchronised. FR, UK and US have closely linked cycles in all financial variables and house prices. Furthermore, credit and house price cycles are linked to cycles in real GDP in many countries. Frequency ranges and country coverage of co-movements highlight the importance of country-specific developments.