**2. Related literature**

Our study constructs on an extended literature, which is focus on the business cycle, the financial cycle, the energy commodities such as oil, and the non-energy commodities such as gold.

The interlink between the financial sphere and the real sphere within the economic activity, shed the light to any macroeconomic or monetary policy is conducted. Several documented studies highlight the interaction of the financial cycle and the business cycle within the occurrence of the multi-type of crisis. Helbling et al. [13] provide an analysis of the interlink between the credit market and the global business cycle naming that credit shocks play an important role in shaping the US business cycle. Drehmann et al. [14] provide a justification on the finding of the prior studies that financial cycles are longer and more ample than business cycles. Claessens et al. [10] report that there are strong links between different phases of business cycles and financial cycles. Recessions associated with financial disruption tend to be longer and deeper than other recessions and recoveries associated with rapid growth in credit and house prices are often stronger. Gerdrup et al. [15] and Detken et al. [16] argue that the average length of the financial cycle is around four times that of the business cycle.

In the same perspective Borio [8] argues that the financial cycle and the business cycle are find out within three properties. The financial cycle is most parsimoniously described in terms of credit and property prices, it has a much lower frequency than the traditional business cycle (2–8 years), its peaks are closely associated with the financial crisis, and it helps to detect financial distress risk in real-time. Stremmel [17], and Stremmel and Zsamboki [18] argue that the financial cycle is less synchronized in tranquil periods and more synchronized in a period of common financial stress. Gorton and Ordonez [19] show that not all credit booms are followed by financial crises. Schüler et al. [20] find that financial cycles exhibit higher amplitude and persistence than business cycles. Rünstler and Vlekke [21] find out that the financial cycle is heterogeneous across European countries having a much longer and more ample financial cycle. The link between the business cycle, the movement in dividends, stock prices have been studied extensively in the macroeconomic and asset pricing literature such as in the works of Lucas [22] and Blanchard [23].

Rangvid [24] finds that the stock price-output ratio is a predictor of expected US stock returns. Cooper and Priestley [25] argue that the output gap has in-ample and out-of-ample predictive power for stock returns in the US and other G7 countries. From the same perspective, Vivian and Wohar [26] analyze whether the US output gap predicts the return of portfolio formed on size and value. Gold is a traded asset globally as an alternative investment class to the ordinary portfolio comprising stocks and bonds. Baur and McDermott [27] argue that gold is a stabilizing factor for the financial system since it minimizes losses for market participants and portfolio managers in the event of negative market shocks. Beaudry et al. [28] argue that the metaphor of profit-driven by fluctuation called gold rushes provides a period of economic boom associated with expenditure aimed at securing a claim near a new found vein of gold.

Pierdzioch et al. [29] found that the international business cycle has out-of-ample predictive power for gold price fluctuations. Apergis and Eleftheriou [30] found that the business cycle asymmetrically affects gold returns, while these returns respond stronger during the recessionary than booming phases of the cycle. Within the same perspective applying to several types of precious metals such as gold, silver and platinum, Kucher and McCoskey [31] found that the co-integrating relationships between precious metal prices are not stable over time with significant shifts in the price relation around business cycle peaks and during recessions. Within the last decade, after the oil shocks and petroleum crisis, the constraint of adjustment within the capital market has probably less influenced by the size and level of stock trading which for some countries targeted their policies for the optimum arrangements for their portfolios. For the policy economic makers, they have to take their decisions on the volume and pricing of oil with the desired level of oil revenues and their use (consumer goods, investment goods, and financial investments). The interlink between oil as a main key for the financial sphere and the real sphere has been documented in several studies on the impact of the volatility of pricing oil on the business cycle. The oil is acting as the hedge fund for several investments, the interlink with the cyclicity of the economic system as a source of the business cycle is a topic for a prominent literature review.

Hamilton [32] is shedding light on oil as a source of the business cycle in the case of the US, by finding out that an increase in oil is leading to a recession in the US. The volatility of oil prices such as an increase has a positive effect on the output of the exporting countries [33]. The prominent works by Estrella and Hardouvelis [34], Estrella and Mishkin [35], Chauvet and Potter [36], Nyberg [37], and Ng [38] studying the impact of oil price shocks on business cycle fluctuations, by modeling the probability of the recession and the Probit and Logit models as binary dependent variable models. The main result of these models is identifying the term spread and stock market returns as useful predictors of US recessions. Michael [39] found that shocks of the oil price explain the reduced fraction of the real GNP growth and inflation variance in US and Japan. Sadorsky [40] found that oil price volatility shocks have asymmetric effects on the market activity. From a different empirical approach Elder and Serletis [41] argued that oil price volatility has a negative and statistically significant impact on several measures of investment, durable consumption, and aggregate output.

Moreover, using a GARCH-in mean empirical method, Elder and Serletis [41] found that the volatility in oil price shocks has a negative and statistically significant effect on different measures of investment, durable consumption, and aggregate output. Jo [42] showed the negative effect of oil price uncertainty shock on world

*The Global Business Cycle within the New Commodities and the Financial Cycle… DOI: http://dx.doi.org/10.5772/intechopen.111482*

industrial production using a quarterly vector autoregressive model with stochastic volatility in mean. In the same perspective, [43] use the oil supply and demand shocks to estimate the US dividend yields components. Using a measure oil market uncertainty Yin and Feng [44] studied the dynamic relationship between oil market uncertainty and international business cycles, the authors have found that oil market uncertainty has a linear leading effect on international business cycles. Pönkä and Zheng [45] studied the role of oil prices in forecasting the Russian recession period using a Probit model. The author suggests that fluctuations in nominal oil prices are useful predictors of the Russian business cycle, with the term spread turning out to be the most powerful predictor of future recessions.

Our contribution to the literature by summing up the three sources of international business cycles such as the financial cycle, the gold and the oil on the trend of the international business cycle, is the use of the Unobserved Component Model Univariate and Multivariate based on the significant studies of Polbin [46], Grant and Chan [47], and Yoon [48].
