Banking Sector Pro-Cyclicality Amplifies Financial Crisis Severity Worldwide
The study looked at financial and real business cycles in OECD countries, comparing the recent cycle to past ones. They found that during the "great moderation," real business cycle amplitudes decreased while asset price cycles became more volatile. The banking sector played a role in this by showing pro-cyclical behavior. The study also noted increased synchronization of economic and financial cycles, which may have contributed to the severity of the crisis.