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National and International Business Cycle Effects of Housing Crises

  • Nils Jannsen

Housing crises usually go hand in hand with a long-lasting recession and a considerable loss in output. By looking at historical crises, we show that the downturns in the housing markets in the United States, the United Kingdom, Spain, and France, beginning in 2006 and in 2007, were followed by exceptionally strong recessions. Then, we investigate the international transmission effects of housing crises by applying models that stress the importance of the trade channel as a transmission channel. We demonstrate that recessions triggered by housing crises are in general strong enough to lead to significant negative international spillover effects. Further, we show that the housing market downturns in the above four countries are sufficient to explain to a considerable degree the recessions that took place all over the world during the Great Recession of 2008 / 2009 and in particular in European countries via international spillover effects. However, these housing crises are not sufficient to explain the steep downturn that could be observed in many countries during the winter half year 2008 / 2009.

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Article provided by Duncker & Humblot, Berlin in its journal Applied Economics Quarterly.

Volume (Year): 56 (2010)
Issue (Month): 2 ()
Pages: 175-206

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Handle: RePEc:aeq:aeqaeq:v56_y2010_i3_q3_p175-206
Contact details of provider: Web page: http://www.duncker-humblot.de

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  1. Dées, Stéphane & Holly, Sean & Pesaran, Hashem & Smith, Vanessa, 2007. "Long run macroeconomic relations in the global economy," Working Paper Series 0750, European Central Bank.
  2. Filippo di Mauro & L. Vanessa Smith & Stephane Dees & M. Hashem Pesaran, 2007. "Exploring the international linkages of the euro area: a global VAR analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 1-38.
  3. M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2001. "Modelling regional interdependencies using a global error-correcting macroeconometric model," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B4-1, International Conferences on Panel Data.
  4. DETKEN Carsten & SMETS Frank, . "Asset Price Booms and Monetary Policy," EcoMod2003 330700042, EcoMod.
  5. Tilak Abeysinghe & Kristin J. Forbes, 2001. "Trade Linkages and Output-Multiplier Effects: A Structural VAR Approach with a Focus on Asia," NBER Working Papers 8600, National Bureau of Economic Research, Inc.
  6. Edward E. Leamer, 2007. "Housing is the business cycle," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 149-233.
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