Figure 4 Inflation expectations for 2011 (1)  (annual change, percent)  8 7 6 5 4 3 2 1 0  Developed economies (2)  Latin America  Emerging Asia  Eastern Europe  (1) Average inflation of the year, with the exception of Latin America, which uses inflation at December 2011. (2) Geometric average for the U.S., the Eurozone and Japan. Source: Consensus Forecasts. BIS central bankers’ speeches  7  Figure 5 MPR in the world (1) (percent) 9 8 7 6 5 4 3 2 1 0  06  07  08  09  10  Developed economies (2) Emerging economies (3) Chile  11  9 8 7 6 5 4 3 2 1 0  Expected MPR (4) (percent)  5  5  4  4  3  3  2  2  1  1  0  0  08  09  10  11  U.S.A. Eurozone  12  Japan  (1) Simple average of reference rates for each group of countries. (2) Includes the U.S., Japan, the U.K. and the Eurozone. (3) Includes Brazil, Colombia, China, the Czech Rep., Hungary, Mexico, Peru, Poland, South Africa and South Korea. (4) Gray area indicates trajectory implicit in futures contracts. Dotted line shows market forecast at the statistical cutoff of December's Monetary Policy Report. Sources: Central bank of respective country and Bloomberg.
On the face of it, these summary statistics are consistent with credit dynamics being distinct from GDP dynamics. It is possible to formalise this intuition by using filtering techniques to  11  The countries covered are: Australia, Canada, Germany, Denmark, Spain, France, United Kingdom, Italy, Netherlands, Norway, Sweden and the United States. 12  They argue that medium term cycles in GDP reflect persistent responses of real activity to the high-frequency fluctuations normally associated with the “business cycle” (Comin and Gertler, op. cit.). In this sense, there is a direct analogy with our model, in which strategic complementarities in risk taking can generate persistent credit cycles in response to high-frequency fluctuations in fundamentals. 13  The bank loans series consists of total domestic currency loans of banks and banking institutions to companies and households, while the assets series consists of total domestic currency assets of banks and banking institutions. For a full description of the data and its sources, see Schularick and Taylor (2009), Appendix B.  BIS Review 168/2010  9  extract the cycle in credit. To do so, we apply a band-pass filter to the data. 14 This isolates the cyclical component of a series operating in a frequency range specified by the user. 15 Charts 6–7 show cyclical fluctuations in real loan growth in the UK and US. The specified frequency domain is 8–20 years. Shorter-term, business cycle fluctuations, say between 2–8 years, were typically not found to account for much of the overall cyclical variation in credit.