March 2019 issue contents
The Synchronization of Business Cycles and Financial Cycles in the Euro Area

William Oman
International Monetary Fund and CES, Université Paris 1 Panthéon-Sorbonne


Using a frequency-based filter, I document the existence of a euro-area financial cycle and high- and low-amplitude national financial cycles. Applying concordance and similarity analysis to business and financial cycles, I provide evidence of five empirical regularities: (i) the aggregate euro-area creditto- GDP ratio behaved procyclically in the years preceding euro-area recessions; (ii) financial cycles are less synchronized than business cycles; (iii) business cycle synchronization has increased while financial cycle synchronization has decreased; (iv) financial cycle desynchronization was more pronounced between high-amplitude and low-amplitude countries, especially Germany; (v) high-amplitude countries and Germany experienced divergent leverage dynamics after 2002.

JEL Code: E32, E44, E58, F36, F44, F45.

Full article (PDF, 36 pages, 1,939 kb)