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Short and medium term financial-real cycles: An empirical assessment

Stockhammer, Engelbert; Calvert Jump, Robert; Kohler, Karsten; Cavallero, Julian


Engelbert Stockhammer

Karsten Kohler

Julian Cavallero


© 2019 Elsevier Ltd Theories such as Minsky's financial instability hypothesis or New Keynesian financial accelerator models assign a key role to financial factors in business cycle dynamics. We propose a simple VAR-based estimation framework to examine some of the financial-real interaction mechanisms that are at the core of these theories. We examine cycle frequencies in seven OECD countries over the period 1970–2015, and find that output contains short- and medium business cycle frequencies, while interest rates, business debt, and household debt exhibit short-, medium- and long cycles, respectively. We find robust evidence for financial-real interaction mechanisms (i) at high frequencies between interest rates and GDP in Australia and the USA and (ii) at medium frequencies between business debt and GDP in Canada and Great Britain. The effect of interest rates and debt seems to operate via investment rather than consumption. We find no evidence for an interaction mechanism between household debt and GDP. Our results provide support for Minskyan and financial accelerator models in which output interacts with interest rates or corporate debt.


Stockhammer, E., Calvert Jump, R., Kohler, K., & Cavallero, J. (2019). Short and medium term financial-real cycles: An empirical assessment. Journal of International Money and Finance, 94, 81-96.

Journal Article Type Article
Acceptance Date Feb 2, 2019
Online Publication Date Feb 7, 2019
Publication Date Jun 1, 2019
Deposit Date Feb 7, 2019
Publicly Available Date Aug 8, 2020
Journal Journal of International Money and Finance
Print ISSN 0261-5606
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 94
Pages 81-96
Public URL
Publisher URL
Additional Information Additional Information : This is the author's accepted manuscript. The final published version is available here:


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