We propose a joint dating of Italian business and credit cycles on a historical basis by applying a local turning-point dating algorithm to the level of the variables. In addition to short cycles corresponding to traditional business cycle fluctuations, we also investigate medium cycles because there is evidence that financial booms and busts are longer and more persistent than business cycles. The results show that medium-term cycles account for the largest part of fluctuations of the Italian credit cycle. Second, we find evidence that credit and business cycles are weakly synchronized in the medium term, whereas they steadily comove in the short term, when the GDP cycle is leading the bank credit cycle. However, the study found that, over the medium cycles, economic downturns associated with credit crunches and financial disruption are more severe than other types of economic downturns. Finally, by modelling interaction between credit and business cycles in a simple threshold VAR model, we confirm that GDP response to credit shock is much more intense in the recessionary regime of credit cycles. JEL CLASSIFICATION: E32, E44, N13, N14
Business cycles, credit cycles, and asymmetric effects of credit fluctuations: evidence from Italy for the period of 1861–2013
Bartoletto, Silvana;Chiarini, Bruno
;Marzano, Elisabetta;
2019-01-01
Abstract
We propose a joint dating of Italian business and credit cycles on a historical basis by applying a local turning-point dating algorithm to the level of the variables. In addition to short cycles corresponding to traditional business cycle fluctuations, we also investigate medium cycles because there is evidence that financial booms and busts are longer and more persistent than business cycles. The results show that medium-term cycles account for the largest part of fluctuations of the Italian credit cycle. Second, we find evidence that credit and business cycles are weakly synchronized in the medium term, whereas they steadily comove in the short term, when the GDP cycle is leading the bank credit cycle. However, the study found that, over the medium cycles, economic downturns associated with credit crunches and financial disruption are more severe than other types of economic downturns. Finally, by modelling interaction between credit and business cycles in a simple threshold VAR model, we confirm that GDP response to credit shock is much more intense in the recessionary regime of credit cycles. JEL CLASSIFICATION: E32, E44, N13, N14I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.