Business Cycle and Financial Cycle Spillovers in the G7 Countries

Antonakakis, Nikolaos ORCID: and Breitenlechner, Max and Scharler, Johann (2015) Business Cycle and Financial Cycle Spillovers in the G7 Countries. The Quarterly Review of Economics and Finance , 58. pp. 154-162. ISSN 1062-9769


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In this study we examine the dynamic interactions between credit growth and output growth using the spillover index approach of Diebold and Yilmaz (2012). Based on quarterly data on credit growth and GDP growth over the period 1957Q1 -2012Q4 for the G7 countries we find that: (i) spillovers between credit growth and GDP growth evolve rather heterogeneously over time and across countries, and increase during extreme economic events. (ii) Spillovers between credit growth and GDP growth are of bidirectional nature, indicating bidirectional spillovers of shocks between the financial and the real sector. (iii) In the period shortly before and during the global financial crisis, the link between credit growth and GDP growth becomes more pronounced. In particular, the financial sector plays a dominant role during the early stages of the crisis, while the real sector quickly takes over as the dominant source of spillovers. (iv) Interestingly, credit growth in the US is the dominant transmitter of shocks to the G7 countries, and especially to other G7 countries' real sectors in the run up period to (and during) the global financial crisis. Overall, our results suggest that the magnitude and direction of spillovers between financial cycles and business cycles vary over time along with changes in the economic environment in the G7 countries.

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version requires a subscription. The original publication is available at
Keywords: business cycle / financial cycle / spillovers / crisis / recession
Classification Codes: JEL C32, E32, E44, E51, F42
Divisions: Departments > Volkswirtschaft > Internationale Wirtschaft
Version of the Document: Accepted for Publication
Variance from Published Version: Minor
Depositing User: Nikolaos Antonakakis
Date Deposited: 19 Mar 2015 13:10
Last Modified: 04 Dec 2019 11:58
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