Business Cycles, Credit Cycles and Bank Holdings of Sovereign Bonds: Historical Evidence for Italy 1861-2013

50 Pages Posted: 7 May 2015

See all articles by Silvana Bartoletto

Silvana Bartoletto

University of Naples Parthenope - Department of Economic Studies (DES)

Bruno Chiarini

University of Naples, Parthenope

Elisabetta Marzano

University of Naples Parthenope - Department of Economic Studies (DES)

Paolo Piselli

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: April 29, 2015

Abstract

We propose a joint dating of the Italian business and credit cycle on a historical horizon, by applying a local turning-point dating algorithm to the level of the variables. Along with short cycles, corresponding to traditional business cycle fluctuations, we also investigate medium cycles, because there is evidence that financial booms and busts are longer and persistent than the business cycle. After comparing our cycles with the prominent qualitative features of the Italian economy, we carry out some statistical tests for comovement between credit and business cycle and we propose a measure of asymmetry of this comovement, which proves to be weaker in recessions. We find evidence that credit and business cycle are poorly synchronized especially in the medium term, although, when credit and real contractions overlap, recessions are definitely more severe. We do not find evidence that credit leads the business cycle, both in the medium or in the short fluctuations. On the contrary, in the short cycle, we find some evidence that business cycle leads the credit one. Finally, credit and business cycle comovement increases when credit embodies public bonds held by banks, a bank financing to the public sector. However, in the post‐WWII era, this financial backup to the public side of the economy has occurred at the expense of bank lending.

Keywords: financial cycle, bank credit, medium-term fluctuations

JEL Classification: N130, N140

Suggested Citation

Bartoletto, Silvana and Chiarini, Bruno and Marzano, Elisabetta and Piselli, Paolo, Business Cycles, Credit Cycles and Bank Holdings of Sovereign Bonds: Historical Evidence for Italy 1861-2013 (April 29, 2015). CESifo Working Paper Series No. 5318, Available at SSRN: https://ssrn.com/abstract=2603183

Silvana Bartoletto

University of Naples Parthenope - Department of Economic Studies (DES) ( email )

via Medina 40
Naples, 80133
Italy

Bruno Chiarini

University of Naples, Parthenope ( email )

Via Generale Parisi 13
Napoli, 80133
Italy

Elisabetta Marzano (Contact Author)

University of Naples Parthenope - Department of Economic Studies (DES) ( email )

via Medina 40
Naples, 80133
Italy

Paolo Piselli

Bank of Italy ( email )

Via Milano, 64
00184 Rome
Italy

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