Rünstler, Gerhard Balfoussia, Hiona Burlon, Lorenzo Buss, Ginters Comunale, Mariarosaria De Backer, Bruno Dewachter, Hans Guarda, Paolo Haavio, Markus Hindrayanto, Irma Iskrev, Nikolai Ivanov Jaccard, Ivan Kulikov, Dmitry Kunovac, Davor Lenarcic, Crt Lequien, Matthieu Lozej, Matija Mandler, Martin Papageorgiou, Dimitris Pedersen, Jesper Perez-Quiros, Gabriel Rannenberg, Ansgar Rots, Eyno Scharnagl, Michael Welz, Peter
Year of Publication:
ECB Occasional Paper 205
This paper studies the cyclical properties of real GDP, house prices, credit, and nominal liquid financial assets in 17 EU countries, by applying several methods to extract cycles. The estimates confirm earlier findings of large medium-term cycles in credit volumes and house prices. GDP appears to be subject to fluctuations at both business-cycle and medium-term frequencies, and GDP fluctuations at medium-term frequencies are strongly correlated with cycles in credit and house prices. Cycles in equity prices and long-term interest rates are considerably shorter than those in credit and house prices and have little in common with the latter. Credit and house price cycles are weakly synchronous across countries and their volatilities vary widely - these differences may be related to the structural properties of housing and mortgage markets. Finally, DSGE models can replicate the volatility of cycles in house and equity prices, but not the persistence of house price cycles.