Arbeitspapier
Wavelet decomposition of the financial cycle: An early warning system for financial tsunamis
We propose a wavelet-based approach for construction of a financial cycle proxy. Specifically, we decompose three key macro-financial variables – private credit, house prices, and stock prices – on a frequency-scale basis using wavelet multiresolution analysis. The resulting "wavelet-based" sub-series are aggregated into a composite index representing our cycle proxy. Selection of the sub-series deemed most relevant is done by emphasizing early warning properties. The wavelet-based financial cycle proxy is shown to perform well in detecting banking crises in out-of-sample exercises, outperforming the credit-to-GDP gap and a financial cycle proxy derived using the approach of Schüler et al. (2015).
- ISBN
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978-952-323-165-8
- Sprache
-
Englisch
- Erschienen in
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Series: Bank of Finland Research Discussion Papers ; No. 11/2017
- Klassifikation
-
Wirtschaft
Econometric and Statistical Methods: Special Topics: Other
Business Fluctuations; Cycles
Financial Markets and the Macroeconomy
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Voutilainen, Ville
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Finland
- (wo)
-
Helsinki
- (wann)
-
2017
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Voutilainen, Ville
- Bank of Finland
Entstanden
- 2017
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