Financial cycles synchronisation in South Africa. A dynamic conditional correlation (DCC) Approach

Figures & data

Table 1. Properties of financial and business cycles.

Variable	Mean	Standard deviation	Min	Max	Skewness	Kurtosis
AFC	3.26E-10	0.211	−0.513	0.648	0.635	3.524
CHC	7.19E-10	0.480	−1.150	1.395	0.124	3.040
BC	1E-11	0.044	−0.099	0.120	0.309	2.899

Notes: AFC, CHC, and B.C. refers to the Aggregate Financial Cycle, Credit and Housing Cycle, and the Business Cycle, respectively. Source: Authors’ estimates.

Figure 1. Evolution of financial and business cycles. Source: Authors’ estimates.

Figure 2. Correlation of financial and business cycles. Source: Authors’ estimates.

Table 2. Unit roots results.

	ADF	PP
AFC	−4.643***	−4.473***
CHC	−4.329***	−3.661***
BC	−5.285***	−4.175***

Notes: *** represent levels of significance at  1%. Source: own estimate.

Table 3. Autocorrelation results.

	Ljung Box Q statistics			Arch LM
Variable	36 Lags	24 Lags	12 Lags	36 Lags	24 Lags	12 Lags
AFC	563.29***	525.65***	407.19***	78.51***	84.00***	85.35***
CHC	1204.62***	79.03***	476.28***	84.27***	85.86***	90.10***
BC	650.61***	577.60***	413.74***	78.35***	88.99***	87.78***

Notes: *** represent levels of significance at  1%. Source: own estimate.

Table 4. Dynamic conditional correlation.

Variables		Values
Aggregate Financial Cycle (AFC)
	AFC (−1)	0.23***
	CHC (−1)	0.05**
	BC (−1)	0.21
	α	0.05
	β	0.85***
Credit and Housing Cycle (CHC)
	AFC (−1)	0.25*
	CHC (−1)	0.12***
	BC (−1)	1.22
	α	0.16***
	β	0.73***
Business Cycle (BC)
	AFC (−1)	0.01
	CHC (−1)	0.02
	BC (−1)	0.05***
	α	0.11***
	β	0.88***
DCC
	Corr of AFC and CHC	0.41***
	Corr of AFC and BC	0.05
	Corr CHC and BC	0.02
	λ1	0.03*
	λ2	0.16**
	Wald Ch2	73.49***

Notes: *, **, ***, represent levels of significance at 10%, 5%, and 1%, respectively. Source: own estimates.

Figure 3. Conditional quasi-correlation of financial and business cycles. Source: Authors’ estimates.

Figure 4. Conditional variance of financial and business cycles. Source: Authors’ estimates.

Table 5. Cointegration of financial and business cycles.

Maximum rank	Params	L.L	Eigenvalue	Trace statistics	5* Critical value
0	12	554.05		129.42	15.41
1	17	560.67	0.07	48.79	3.79
2	20	563.64	0.03

Source: own estimates.

Table 6. VECM short and long-run dynamics.

	AFC	CHC	BC
EC	−0.765***	−0.779***	−0.060***
	(0.087)	(0.168)	(0.016)
AFC (−1)	0.027*	0.541***	−0.037
	(0.076)	(0.147)	(0.014)
CHC (−1)	0.048*	0.448***	−0.001
	(0.038)	(0.073)	(0.007)
BC (−1)	0.088	0.940	−0.348***
	(0.377)	(0.726)	(0.068)
C	0.021	−0.001	0.000
	(0.010)	(0.019)	(0.002)

Notes: * and *** represent significance levels at 10%, and 1% respectively. Source: own estimates.

Figure A1. Screen plot. Source: Authors’ estimates.

Figure A2. Principal component analysis: rotated component loadings. Source: Authors’ estimates.

Data availability statement

Data is available from authors on request.