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Did the Recent Housing Boom Signal the Global Financial Crisis?

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Author Info

  • David M. Kemme

    () (Department of Economics, University of Memphis, Memphis, TN 38152, USA)

  • Saktinil Roy

    () (Centre for Finance, Economics and Operations Management, Athabasca University, 22 Sir Winston Churchill Avenue, Suite 301, Saint Albert, AB T8N 1B4, Canada)

Abstract

Shiller's (2005) prediction of the current global crisis followed from two key observations: (i) the recent housing booms in the United States and other advanced countries were not explained by economic fundamentals; and (ii) historically similar financial booms eventually collapsed, leading to recession. This article provides an empirical framework linking Shiller's (2005) observations and crisis prediction. We utilize vector error correction models and panel probit and logit models to show that tracking a single variable, real house prices, was sufficient to predict the current global crisis.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 78 (2012)
Issue (Month): 3 (January)
Pages: 999-1018

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Handle: RePEc:sej:ancoec:v:78:3:y:2012:p:999-1018

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Grydaki, Maria & Bezemer, Dirk J., 2012. "The Role of Credit in Great Moderation: a Multivariate GARCH Approach," MPRA Paper 39813, University Library of Munich, Germany.
  2. Bezemer, Dirk J & Grydaki, Maria, 2012. "Mortgage Lending and the Great moderation: a multivariate GARCH Approach," MPRA Paper 36356, University Library of Munich, Germany.

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