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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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
Publication Date: December 01, 2008
Format: Paper
Stock No: WPIEA2008274 Pages: 75
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