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Iacovos Ioannou

.5 Slope of downturn 1 / −2.2 −2.0 −2.2 −1.1 −0.4 −0.6 −1.2 −1.4 −1.2 0.7 Sources: IMF staff estimates. 1 / Average growth during upturn/downturn. 23. A comparison of Lithuania’s three cycles reveals that housing price cycles are the most frequent ( Table 4 ). Of the three cycles, output upturns last the longest and housing price upturns the shortest. On the down phase, credit downturns last the longest and output downturns the shortest. Credit changes at the fastest pace (slope) both during upturns and downturns. Housing

Mr. Stijn Claessens, Majid Malaika, and Mr. Marco Terrones

during downturns and the change in each financial variable during the first four quarters of an upturn (see chart 2 ). Credit crunches and house price busts are much more dramatic than other credit and house price downturns. Credit crunches are about four times deeper than the average credit downturn, while house price busts are seven times bigger than the average house price downturn. Equity busts are about twice as large. But in absolute terms, the most severe fluctuations take place in equity markets—where prices during a typical boom register about a 45 percent

Padamja Khandelwal, Ezequiel Cabezon, Mr. Sanan Mirzayev, and Rayah Al-Farah
Limited economic diversification has made the economies of the Caucasus and Central Asia particularly vulnerable to external shocks. The economies in the region are heavily reliant on oil and mining exports as well as remittances. In some countries, tourism and capital flows also play a prominent role in aggregate economic activity.
Padamja Khandelwal, Ezequiel Cabezon, Mr. Sanan Mirzayev, and Rayah Al-Farah

Figure 4. Private Credit in the CCA Contribution to Private Sector Credit Gap Figure 5. Contribution to Private Sector Credit Gap Oil Prices, Remittances, and Credit Downturns Figure 6. Oil Prices, Remittances, and Credit Downturns Figure 7. Housing Prices in US Dollars Figure 8. Real GDP Growth and Credit Downturns Figure 9. NPL s and Credit Downturns Figure 10. Selected Features of Macroprudential Institutional Frameworks Figure 11. Selected Broad Tools to Contain Credit Cycles Figure 12. Selected Tools to Contain FX Risks Figure 13. Dollarization

Mr. Marco Terrones, Mr. Ayhan Kose, and Mr. Stijn Claessens

upturns lasting 10 quarters, compared to almost 32 quarters in the earlier period. The means being (much) larger than the medians suggest though that durations of financial cycles often exhibit rather skewed distributions. 12 Amplitude and Slope . Financial cycles tend to be intense ( Table 1B ). A typical credit downturn episode features about a 4 percent decline in credit and house and equity price downturns typically mean declines of some 6 and 24 percent in the respective asset price. The strength of upturns generally matches that of downturns. However, the

Mr. Marco Terrones, Mr. Ayhan Kose, and Mr. Stijn Claessens
This paper provides a comprehensive analysis of financial cycles using a large database covering 21 advanced countries over the period 1960:1-2007:4. Specifically, we analyze cycles in credit, house prices, and equity prices. We report three main results. First, financial cycles tend to be long and severe, especially those in housing and equity markets. Second, they are highly synchronized within countries, particularly credit and house price cycles. The extent of synchronization of financial cycles across countries is high as well, mainly for credit and equity cycles, and has been increasing over time. Third financial cycles accentuate each other and become magnified, especially during coincident downturns in credit and housing markets. Moreover, globally synchronized downturns tend to be associated with more prolonged and costly episodes, especially for credit and equity cycles. We discuss how these findings can guide future research on various aspects of financial market developments.
Padamja Khandelwal, Ezequiel Cabezon, Mr. Sanan Mirzayev, and Rayah Al-Farah

large credit upturns and downturns. ▪ Credit upturns . Starting in the early 2000s, CCA countries went through a historic credit upturn that lasted an average of 25 quarters, and real credit increased a cumulative seven-fold ( Table 1 ). 6 Starting in the early 2010s, many CCA countries witnessed another strong credit upturn, with an average of 15 uninterrupted quarters of real credit increase. ▪ Credit downturns . There have been 40 credit downturns in CCA countries during 2001–20. Classifying the top 25 percent of downturns as credit busts gives an average

Mr. Marco Terrones, Mr. Ayhan Kose, and Mr. Stijn Claessens

between peak and trough. Duration for upturns is defined as the time it takes to attain the level at the previous peak after the trough. Disruptions (booms) correspond to the bottom (top) 25 percent of downturns (upturns) in terms of amplitude. Downturns (upturns) refer to episodes other than disruptions (booms). A credit downturn (or upturn) is accompanied with a housing bust (boom), if it starts at the same time or after the beginning of an ongoing housing episode. We employ various regression models to analyze how a wide range of factors help explain the duration

International Monetary Fund. External Relations Dept.

seen in perspective and alongside certain trends that could create “self-stabilizing” forces. Although credit spreads could—and probably will—widen, they are considered likely to do so gradually and moderately. For corporations overall, currently healthy and liquid balance sheets should serve as a “long fuse” that would delay a general credit downturn. Similarly, in mature markets’ household sectors, the accumulated increase in household net worth could buffer the immediate impact of any downturn. Aside from these more cyclical factors, two trends could also help