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What Happens During Recessions, Crunches and Busts?

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Author Info
Claessens, Stijn
Kose, Ayhan
Terrones, Marco E.

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Abstract

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7085.

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Date of creation: Dec 2008
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Handle: RePEc:cpr:ceprdp:7085

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Related research
Keywords: business cycles; busts; credit crunches; equity prices; house prices; recessions;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Don Harding & Adrian Pagan, 2009. "An Econometric Analysis of Some Models for Constructed Binary Time Series," NCER Working Paper Series 39, National Centre for Econometric Research, revised 02 Jul 2009. [Downloadable!]
    Other versions:
  2. Argandoña, Antonio, 2009. "Can corporate social responsibility help us understand the credit crisis?," IESE Research Papers D/790, IESE Business School. [Downloadable!]
  3. Selim Elekdag & Roberto Cardarelli & Subir Lall, 2009. "Financial Stress, Downturns, and Recoveries," IMF Working Papers 09/100, International Monetary Fund. [Downloadable!]
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