Three Cycles: Housing, Credit, and Real Activity

We examine the characteristics and comovement of housing, credit and business cycles in advanced economies during the past 25 years using a dynamic generalized factor model. House price cycles generally lead credit and business cycles over the long term, while in the short to medium run the relationship varies across countries. Interest rates tend to lag other cycles at all time horizons. While global factors are important, the U.S. business cycle, house price cycle and interest rate cycle tend to lead the respective cycles in other countries over all time horizons, but the U.S. credit cycle leads mostly over the long term.