What Happens During Recessions, Crunches, and Busts?

 
Author/Editor: Claessens, Stijn ; Kose, M. Ayhan ; Terrones, Marco
 
Publication Date: December 01, 2008
 
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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(s): Economic recession | Business cycles | Financial crisis | Credit | Housing prices | Stock prices | Oil prices | Databases | Economic models

Author's Keyword(s): Business cycles | recessions | credit crunches | house prices | equity prices | busts
 
English
Publication Date: December 01, 2008
Format: Paper
Stock No: WPIEA2008274 Pages: 75
Price:
US$18.00 (Academic Rate:
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