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

48 Pages Posted: 14 Feb 2018

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: November 29, 2017

Abstract

We propose a joint dating of Italian business and credit cycles on a historical basis 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 more persistent than business cycles. 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 cycles and find evidence that credit and business cycles are poorly synchronized, especially in the medium term. Nonetheless, we demonstrate that only for medium-term frequencies the coincidence of financial downturns and economic recessions significantly increases output losses. We do not find evidence that the credit cycle leads the business cycle, both in medium and short-term fluctuations. On the contrary, in the short cycle, we find some evidence that the business cycle leads the credit cycle. Finally, credit and business cycle comovement increases when credit embodies public bonds held by banks, i.e., bank financing to the public sector.

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

JEL Classification: E32, E44, N13, N14

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 (November 29, 2017). Bank of Italy Economic History Working Paper No. 43, Available at SSRN: https://ssrn.com/abstract=3123119 or http://dx.doi.org/10.2139/ssrn.3123119

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

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

via Medina 40
Naples, 80133
Italy

Paolo Piselli (Contact Author)

Bank of Italy ( email )

Via Milano, 64
00184 Rome
Italy

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