Financial cycles in the economy and in economic research: a case study in China

    Yong Qin Affiliation
    ; Zeshui Xu Affiliation
    ; Xinxin Wang Affiliation
    ; Marinko Škare Affiliation
    ; Małgorzata Porada-Rochoń Affiliation


This work explores the relationship between financial cycles in the economy and in economic research. To this aim, we take China as an empirical example, and an intuitive bibliometric analysis of selected terms concerning financial cycles in economic research is performed first. Both in the economy and in economic research, we then conduct singular spectrum analysis to further isolate and describe the specific length and amplitude of financial cycles for China based on quarterly time-series data. Finally, according to the estimated cycles that detrended by Hodrick-Prescott filter for financial and bibliometric variables, the Granger causality test scrutinizes the results of the first two steps. Moreover, a time-varying parameter vector autoregression model is estimated to quantitatively investigate the time-varying interaction between financial and bibliometric variables. Our study shows that financial cycles have a strong effect on the developments in the financial-related literature. In particular, the 2008 global financial crisis’s impulse intensity is significantly higher than in other periods. Surprisingly, discussions on financial cycles in the literature also have an impact on financial activities in real life. These findings contribute to nascent work on the patterns in financial cycles, thus providing a new and effective insight on the interpretation of financial activities.

Keyword : financial cycles, bibliometric analysis, singular spectrum analysis, Granger causality test, TVP-VAR model

How to Cite
Qin, Y., Xu, Z., Wang, X., Škare, M., & Porada-Rochoń, M. (2021). Financial cycles in the economy and in economic research: a case study in China. Technological and Economic Development of Economy, 27(5), 1250-1279.
Published in Issue
Oct 5, 2021
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Aikman, D., Haldane, A. G., & Nelson, B. D. (2015). Curbing the credit cycle. The Economic Journal, 125(585), 1072–1109.

Allen, M., & Smith, L. (1996). Monte Carlo SSA: Detecting irregular oscillations in the Presence of Colored Noise. Journal of Climate, 9.<3373:MCSDIO>2.0.CO;2

Amiti, M., McGuire, P., & Weinstein, D. E. (2019). International bank flows and the global financial cycle. IMF Economic Review, 67(1), 61–108.

Beirne, J. (2020). Financial cycles in asset markets and regions. Economic Modelling, 92, 358–374.

Berger, A. N., & Udell, G. F. (1998). The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle. Journal of Banking & Finance, 22(6), 613–673.

Boisjoly, R. P., Conine, T. E., & McDonald, M. B. (2020). Working capital management: Financial and valuation impacts. Journal of Business Research, 108, 1–8.

Borio, C. (2014). The financial cycle and macroeconomics: What have we learnt? Journal of Banking & Finance, 45, 182–198.

Borio, C. (2017). Secular stagnation or financial cycle drag? Business Economics, 52, 1–12.

Brem, A., Nylund, P., & Viardot, E. (2020). The impact of the 2008 financial crisis on innovation: A dominant design perspective. Journal of Business Research, 110, 360–369.

Chen, H., Yang, Y., Yang, Y., Jiang, W., & Zhou, J. (2014). A bibliometric investigation of life cycle assessment research in the web of science databases. The International Journal of Life Cycle Assessment, 19(10), 1674–1685.

Chen, W., Liu, W., Geng, Y., Brown, M. T., Gao, C., & Wu, R. (2017). Recent progress on emergy research: A bibliometric analysis. Renewable and Sustainable Energy Reviews, 73, 1051–1060.

Claessens, S., Kose, M. A., & Terrones, M. E. (2011). Financial cycles: What? How? When? NBER International Seminar on Macroeconomics, 7(1), 303–344.

Costa, D. F., Carvalho, F. D., Moreira, B. C. D., & do Prado, J. W. (2017). Bibliometric analysis on the association between behavioral finance and decision making with cognitive biases such as overconfidence, anchoring effect and confirmation bias. Scientometrics, 111(3), 1775–1799.

Colebrook, J. M. (1978). Continuous plankton records: Zooplankton and environment, North-East Atlantic and North Sea, 1948–1975. Oceanologica Acta, 1(1), 9–23.

Cortés-Sánchez, J. D. (2019). Innovation in Latin America through the lens of bibliometrics: Crammed and fading away. Scientometrics, 121, 869–895.

Demetrescu, C., Finocchi, I., Ribichini, A., & Schaerf, M. (2020). On bibliometrics in academic promotions: A case study in computer science and engineering in Italy. Scientometrics.

Drehmann, M., Borio, C., & Tsatsaronis, K. (2012). Characterising the financial cycle: Don’t lose sight of the medium term! (BIS Working Papers No. 380, pp. 1–38).

Drehmann, M., Borio, C., & Tsatsaronis, K. (2013). Can we identify the financial cycle? The role of central banks in financial stability how has it changed? Studies in International Economics, 30, 131–156.

Elliott, G., Stock, J., & Rothenberg, T. (1996). Efficient tests for an autoregressive unit root. Econometrica, 64, 813–836.

Elsner, J. B. (2002). Analysis of time series structure: SSA and related techniques. Journal of the American Statistical Association, 97(460), 1207–1208.

Farrell, G., & Kemp, E. (2020). Measuring the financial cycle in South Africa. South African Journal of Economics.

Fidrmuc, J., & Korhonen, I. (2010). The impact of the global financial crisis on business cycles in Asian emerging economies. Journal of Asian Economics, 21(3), 293–303.

Geiger, N. (2014). The rise of behavioural economics: A quantitative assessment. In 18th Annual ESHET Conference on “Liberalisms: perspectives and debates in the history of economic thought” (pp. 29–31).

Geiger, N., & Kufenko, V. (2016). Business cycles in the economy and in economics: an econometric analysis. Scientometrics, 107(1), 43–69.

Geweke, J. F. (1991). Evaluating the accuracy of sampling-based approaches to the calculation of posterior moments (Staff Report 148). Federal Reserve Bank of Minneapolis.

Ghil, M., Allen, M., Dettinger, M., Ide, K., Kondrashov, D., Mann, M., Saunders, A., Tian, Y., & Varadi, F. (2001). Advanced spectral methods for climatic time series. Reviews of Geophysics, 40.

Granger, C. (1980). Testing for causality: A personal viewpoint. Journal of Economic Dynamics and Control, 2, 329–352.

Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424–438.

Groth, A., & Ghil, M. (2015). Monte Carlo Singular Spectrum Analysis (SSA) revisited: Detecting oscillator clusters in multivariate datasets. Journal of Climate, 28(19), 7873–7893.

Hodrick, R. J., & Prescott, E. C. (1997). Postwar U.S. business cycles: An empirical investigation. Journal of Money, Credit and Banking, 29(1), 1–16.

Iacobucci, A. (2005). Spectral analysis for economic time series. Lecture Notes in Economics & Mathematical Systems, 551, 203–219.

Inekwe, J. N., & Valenzuela, M. R. (2020). Financial integration and banking crisis. A critical analysis of restrictions on capital flows. World Economy, 43(2), 506–527.

Jetter, M., & Kristoffersen, I. (2018). Financial shocks and the erosion of interpersonal trust: Evidence from longitudinal data. Journal of Economic Psychology, 67, 162–176.

Jordà, Ò., Schularick, M., & Taylor, A. M. (2013). When credit bites back. Journal of Money, Credit and Banking, 45(s2), 3–28.

Juselius, M., Borio, C., Disyatat, P., & Drehmann, M. (2016). Monetary policy, the financial cycle, and ultra-low interest rates. International Journal of Central Banking, 13, 55–89.

Lee, C.-C., Chen, M.-P., & Ning, S.-L. (2017). Why did some firms perform better in the global financial crisis? Economic Research-Ekonomska Istrazivanja, 30(1), 1339–1366.

Martínez-García, E., & Grossman, V. (2020). Explosive dynamics in house prices? An exploration of financial market spillovers in housing markets around the world. Journal of International Money and Finance, 101, 102103.

Mizen, P., & Tsoukas, S. (2012). The response of the external finance premium in Asian corporate bond markets to financial characteristics, financial constraints and two financial crises. Journal of Banking & Finance, 36(11), 3048–3059.

Morana, C. (2017). The U.S. dollar/Euro exchange rate: Structural modeling and forecasting during the recent financial crises. Journal of Forecasting, 36(8), 919–935.

Mourao, P. R., & Martinho, V. D. (2020). Forest entrepreneurship: A bibliometric analysis and a discussion about the co-authorship networks of an emerging scientific field. Journal of Cleaner Production, 256, 120413.

Muhammad, A., Ali, M. A. H., & Shanono, I. H. (2020). ANSYS-A bibliometric study. Materials Today: Proceedings, 26(2), 1005–1009.

Nakajima, J. (2011). Time-varying parameter VAR model with stochastic volatility: An overview of methodology and empirical applications. Monetary and Economic Studies, 29, 107–142.

Nielsen, B. (2001). Order determination in general vector autoregressions. IMS Lecture Notes-Monograph Series, 52.

Ouyang, A. Y., & Guo, S. (2019). Macro-prudential policies, the global financial cycle and the real exchange rate. Journal of International Money and Finance, 96, 147–167.

Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329–340.

Pagan, A., & Robinson, T. (2014). Methods for assessing the impact of financial effects on business cycles in macroeconometric models. Journal of Macroeconomics, 41, 94–106.

Pinheiro, T., Rivadeneyra, F., & Teignier, M. (2017). Financial development, credit, and business cycles. Journal of Money Credit and Banking, 49(7), 1653–1665.

Pontines, V. (2017). The financial cycles in four East Asian economies. Economic Modelling, 65, 51–66.

Pragidis, I. C., Tsintzos, P., & Plakandaras, B. (2018). Asymmetric effects of government spending shocks during the financial cycle. Economic Modelling, 68, 372–387.

Primiceri, G. E. (2005). Time varying structural vector autoregressions and monetary policy. The Review of Economic Studies, 72(3), 821–852.

Qin, Y., Wang, X. X., Xu, Z. S., & Škare, M. (2021). The impact of poverty cycles on economic research: evidence from econometric analysis. Economic Research-Ekonomska Istraživanja, 34(1), 152–171.

Qin, Y., Xu, Z. S., Wang, X. X., & Škare, M. (2020). Are family firms in the eyes of economic policy? International Entrepreneurship and Management Journal.

Rey, H. (2013). Dilemma not trilemma: the global cycle and monetary policy independence. Proceedings – Economic Policy Symposium – Jackson Hole, 1–2.

Rozite, K., Bezemer, D. J., & Jacobs, J. P. A. M. (2019). Towards a financial cycle for the U.S., 1973–2014. The North American Journal of Economics and Finance, 50, 101023.

Schularick, M., & Taylor, A. (2009). Credit booms gone bust: Monetary policy, leverage cycles, and financial crises, 1870–2008. American Economic Review, 102, 1029–1061.

Schüler, Y. S., Hiebert, P. P., & Peltonen, T. A. (2020). Financial cycles: Characterisation and real-time measurement. Journal of International Money and Finance, 100, 102082.

Shen, C.-H., Shi, J.-G., & Wu, M.-W. (2019). Is finance a veil? Lead-and-lag relationship between financial and business cycles: The case of China. European Financial Management, 25(4), 978–1012.

Sims, C. A. (1980). Macroeconomics and Reality. Econometrica, 48(1), 1–48.

Škare, M., & Porada-Rochon, M. (2019). Tracking financial cycles in ten transitional economies 2005– 2018 using singular spectrum analysis (SSA) techniques. Equilibrium-Quarterly Journal of Economics and Economic Policy, 14(1), 7–29.

Škare, M., & Porada-Rochoń, M. (2020). Multi-channel singular-spectrum analysis of financial cycles in ten developed economies for 1970–2018. Journal of Business Research, 112, 567–575.

Strohsal, T., Proaño, C. R., & Wolters, J. (2019a). Assessing the cross-country interaction of financial cycles: Evidence from a multivariate spectral analysis of the USA and the U.K. Empirical Economics, 57(2), 385–398.

Strohsal, T., Proaño, C. R., & Wolters, J. (2019b). Characterizing the financial cycle: Evidence from a frequency domain analysis. Journal of Banking & Finance, 106, 568–591.

Tunger, D., & Eulerich, M. (2018). Bibliometric analysis of corporate governance research in Germanspeaking countries: Applying bibliometrics to business research using a custom-made database. Scientometrics, 117(3), 2041–2059.

Tandon, A., Kaur, P., Mäntymäki, M., & Dhir, A. (2021). Blockchain applications in management: A bibliometric analysis and literature review. Technological Forecasting and Social Change, 166, 120649.

Vautard, R., & Ghil, M. (1989). Singular spectrum analysis in nonlinear dynamics, with applications to paleoclimatic time series. Physica D: Nonlinear Phenomena, 35(3), 395–424.

Vautard, R., Yiou, P., & Ghil, M. (1992). Singular-spectrum analysis: A toolkit for short, noisy chaotic signals. Physica D: Nonlinear Phenomena, 58(1), 95–126.

Wang, X. X., Xu, Z. S., Su, S. F., & Zhou, W. (2021). A comprehensive bibliometric analysis of uncertain group decision making from 1980 to 2019. Information Sciences, 547, 328–353.

Wen, F., Zhang, M., Deng, M., Zhao, Y., & Ouyang, J. (2019). Exploring the dynamic effects of financial factors on oil prices based on a TVP-VAR model. Physica A: Statistical Mechanics and its Applications, 532, 121881.

Yu, D. J., Xu, Z. S., & Saparauskas, J. (2019). The evolution of “Technological and Economic Development of Economy”: A bibliometric analysis. Technological and Economic Development of Economy, 25(3), 369–385.

Yamani, E. (2019). Diversification role of currency momentum for carry trade: Evidence from financial crises. Journal of Multinational Financial Management, 49, 1–19.

Yan, C., & Huang, K. X. D. (2020). Financial cycle and business cycle: An empirical analysis based on the data from the U.S. Economic Modelling, 93, 693–701.

Yépez, C. A. (2018). Financial intermediation and real estate prices impact on business cycles: A Bayesian analysis. The North American Journal of Economics and Finance, 45, 138–160.

Zouri, S. (2020). Business cycles, bilateral trade and financial integration: Evidence from economic community of West African states (ECOWAS). International Economics, 163, 25–43.