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National and International Business Cycle Effects of Housing Crises

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  • Nils Jannsen

Abstract

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.

Suggested Citation

  • Nils Jannsen, 2010. "National and International Business Cycle Effects of Housing Crises," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(2), pages 175-206.
    • Handle: RePEc:aeq:aeqaeq:v56_y2010_i3_q3_p175-206
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    References listed on IDEAS

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    1. Pesaran, Mohammad Hashem & Holly, Sean & Dees, Stephane & Smith, L. Vanessa, 2007. "Long Run Macroeconomic Relations in the Global Economy," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-20.
    2. Pesaran M.H. & Schuermann T. & Weiner S.M., 2004. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 129-162, April.
    3. 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.
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    Citations

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    Cited by:

    1. Alexander Chudik & M. Hashem Pesaran, 2016. "Theory And Practice Of Gvar Modelling," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 165-197, February.
    2. Dufrénot, Gilles & Malik, Sheheryar, 2012. "The changing role of house price dynamics over the business cycle," Economic Modelling, Elsevier, vol. 29(5), pages 1960-1967.
    3. Christian Aßmann & Jens Boysen-Hogrefe & Nils Jannsen, 2013. "Costs Of Housing Crises: International Evidence," Bulletin of Economic Research, Wiley Blackwell, vol. 65(4), pages 299-313, October.
    4. Zuzana Brixiova & Laura Vartia & Andreas Wörgötter, 2009. "Capital Inflows, Household Debt and the Boom-bust Cycle in Estonia," OECD Economics Department Working Papers 700, OECD Publishing.
    5. Nicole Aregger & Martin Brown & Enzo Rossi, 2013. "Transaction Taxes, Capital Gains Taxes and House Prices," Working Papers 2013-02, Swiss National Bank.
    6. Dovern, Jonas & Jannsen, Nils, 2009. "Estimating the shape of economic crises under heterogeneity," Kiel Working Papers 1520, Kiel Institute for the World Economy (IfW).
    7. Gern, Klaus-Jürgen & Jannsen, Nils & van Roye, Björn & Scheide, Joachim, 2010. "Erholung der Weltwirtschaft verliert an Schwung," Open Access Publications from Kiel Institute for the World Economy 45574, Kiel Institute for the World Economy (IfW).
    8. Jannsen, Nils & Scheide, Joachim, 2010. "Growth patterns after the crisis: This time is not different," Kiel Policy Brief 22, Kiel Institute for the World Economy (IfW).
    9. Jannsen, Nils & Scheide, Joachim, 2010. "Growth patterns after the crisis: This time is not different," Open Access Publications from Kiel Institute for the World Economy 47873, Kiel Institute for the World Economy (IfW).
    10. Brixiova, Zuzana & Vartia, Laura & Wörgötter, Andreas, 2010. "Capital flows and the boom-bust cycle: The case of Estonia," Economic Systems, Elsevier, vol. 34(1), pages 55-72, March.
    11. Kooths, Stefan, 2012. "Zur Gefahr einer Immobilienpreisblase in Deutschland," IfW-Box 2012.4, Kiel Institute for the World Economy (IfW).
    12. Dovern, Jonas & van Roye, Björn, 2013. "International transmission of financial stress: Evidence from a GVAR," Kiel Working Papers 1844, Kiel Institute for the World Economy (IfW).
    13. Boysen-Hogrefe, Jens, 2011. "Sinkende Immobilienpreise in China: Gefahr für die Weltkonjunktur?," IfW-Box 2011.22, Kiel Institute for the World Economy (IfW).
    14. Liis Roosaar & Urmas Varblane & Jaan Masso, 2020. "Productivity Gains From Labour Churning In Economic Crisis: Do Foreign Firms Gain More?," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 125, Faculty of Economics and Business Administration, University of Tartu (Estonia).

    More about this item

    Keywords

    Housing Crisis; Business Cycle; International Transmission;

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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