What Happens During Recessions, Crunches and Busts?

Author/Editor:

Marco Terrones ; Ayhan Kose ; Stijn Claessens

Publication Date:

December 1, 2008

Electronic Access:

Free Full text (PDF file size is 983 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 OECD countries over the period 1960–2007. In particular, we analyze the implications of 122 recessions, 112 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 234 (58) episodes of equity price declines (busts) and their various overlaps in these countries over the sample period. Our results indicate that interactions between macroeconomic and financial variables can play major roles in determining the severity and duration of recessions. Specifically, we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions. JEL Classification Numbers: E32; E44; E51; F42

Series:

Working Paper No. 08/274

Subject:

English

Publication Date:

December 1, 2008

ISBN/ISSN:

9781451871326/1018-5941

Stock No:

WPIEA2008274

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

75

Please address any questions about this title to publications@imf.org