Credit cycles and business cycles in twenty EU economies

Given that EU has been frequently described as having bank-dominated (or hybrid) financial systems, an understanding of the particularities of the flows of credit and their interferences with shifts in the business cycle (either boom or bust phases) is essential not only for policymakers but also for market participants. In this context, this research offers a fresh view by performing an econometric analysis on the credit cycle and business cycle in twenty advanced and developing EU economies, with the purpose of better understanding their behavior and the impact of the interactions between them. It analyses, on the one hand, the short-term dynamics of the relationships between credit expansion and economic growth; and, on the other hand, it investigates the cyclical components of the two variables by performing statistical analysis on the medium-term relationships between them (volatility, amplitude, persistence, correlation, spill-over effects). (C) 2014 The Authors. Published by Elsevier B.V.