What Happens During Recessions, Crunches and Busts?
December 1, 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
Subject: Asset prices, Credit, Housing prices, Oil prices, Stocks
Keywords: asset price, credit contraction, equity price, house price, price bust, recession episode, WP
Pages:
75
Volume:
2008
DOI:
Issue:
274
Series:
Working Paper No. 2008/274
Stock No:
WPIEA2008274
ISBN:
9781451871326
ISSN:
1018-5941
