On the Direction of Causality between Business and Financial Cycles
Bibliographic record
Abstract
This paper investigates whether business cycles cause financial cycles or vice versa. We also assess whether the US plays a leading role in causing the domestic business and financial cycles of other countries. The literature has established that business and financial cycles are linked through several channels such as credit constraints, the real effects of financial information and the reversal of overoptimistic expectations. Our analysis evaluates the direction of Granger causality using a novel approach based on the mixed-frequency vector autoregression model for the G7 countries. Our approach exploits the fact that real economic activity measured by industrial production is observed at a higher frequency than aggregate credit. We find strong evidence of bidirectional causality between the business and financial cycles, especially in recessions. Furthermore, the US is a global leader since the US business cycle significantly affects other countries’ business cycles, especially in terms of expansions.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.005 | 0.025 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.004 | 0.003 |
| Science and technology studies | 0.001 | 0.002 |
| Scholarly communication | 0.002 | 0.002 |
| Open science | 0.000 | 0.001 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.010 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".