Boom and Bust. A Brief Analysis of the Financial Cycle and its Lessons

Seminar paper from the year 2019 in the subject Economics - Economic Cycle and Growth, grade: 1.3, University of Gِttingen (Wirtschaftswissenschaftliche Fakultنt), course: International Financial Market, language: English, abstract: This paper mainly analyzes the implications of the financial cycle and its interactions with the traditional business cycle. Using frequency-based filter and turning-point analysis to measure duration, amplitude and evolution of the financial cycle it is shown, that the results of both approaches for the financial cycle are similar and fit the actual dates well. Further, it is found find that although financial and economic cycles are completely different, they are closely related.The financial cycle significantly amplifies fluctuations in the real economy. Other issues such like optimal monetary and fiscal policies and potential warning indicators are also analyzed.