Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/204027
Authors: 
Adarov, Amat
Year of Publication: 
2019
Series/Report no.: 
wiiw Working Paper 162
Abstract: 
We use Bayesian and GMM panel VAR frameworks to study interactions between financial cycles and macroeconomic imbalances based on a global sample of 24 countries spanning the period 1998‑2012. We find that financial cycles play an important role in shaping macroeconomic imbalances with expansions inducing economic overheating and a downward pressure on public debt-to-GDP ratios, and vice versa. Bank-based economies exhibit a deeper and faster response of business cycles to financial misalignments, while the impact in market-based economies is milder, but more persistent, as well as more significant for current account and public debt dynamics. Financial cycles invoke a particularly strong reaction of current account balances and especially public debt ratios in the euro area.
Subjects: 
financial cycles
macroeconomic imbalances
financial stability
business cycles
panel VAR
Bayesian VAR
JEL: 
E44
F32
G15
F4
Document Type: 
Working Paper

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