It is a method of identifying cyclical behavior of financial activity. The financial cycle is defined as “deviations from the long-term trend of a group of variables that are important to financial stability". The definition first requires us to choose the relevant variables, and then to choose the method of identifying deviations in the trend.
In accordance with the literature, the Bank of Israel examined a number of estimations for identifying the financial cycle, including private credit, home prices, share prices, and the slope of the real yield curve.