Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333896 
Year of Publication: 
2025
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 33/2025
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
Financial cycles refer to fluctuations in credit and house prices that extend beyond typical business cycles. Despite its significance for both monetary and macropru- dential policy, the question of how monetary policy shapes financial cycles remains largely unanswered. We extract innovations from a vector autoregression that account for most of the cyclical co-movement between credit and house price growth at medium frequencies. Our findings indicate that systematic monetary policy plays a crucial role in propagating this innovation and can significantly dampen financial cycles, particularly when counteracting house price movements. These stabilizing effects could have substantially mitigated the U.S. financial cycle during the 2000s.
Subjects: 
Financial cycle
monetary policy
policy counterfactual
JEL: 
C32
E32
E52
ISBN: 
978-3-98848-054-5
Document Type: 
Working Paper

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