Measuring real and financial cycles in Luxembourg: an unobserved components approach

DateMarch 2019
AuteurPaolo Guarda ans Alban Moura

We use unobserved components time series models to extract real and financial cycles for Luxembourg over the period 1980Q1-2018Q2. We find that financial cycles are longer and have larger amplitude compared to standard business cycles. Furthermore, financial cycles are highly correlated with cycles in GDP. We compare our results to other approaches to measure financial cycles and show how unobserved components models can serve to evaluate uncertainty and to monitor cyclical developments in real time. Overall, our estimates indicate that in mid 2018 both real and financial cycles in Luxembourg were close to zero, with financial conditions near their long-run trend.

JEL Codes: C22, C32, E30, E50, G01.

Keywords: financial cycles, unobserved component time series models, Luxembourg.

Téléchargement Cahier d'étude 126 (pdf, 671 KByte)