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What happens during recessions, crunches and busts?
[Business cycles for G-7 and European countries]

Author

Listed:
  • Stijn Claessens
  • M. Ayhan Kose
  • Marco E. Terrones

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 analyse the implications of 122 recessions, 113 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 245 (61) episodes of equity price declines (busts), and their various overlaps in these countries, over the sample period. Our results indicate that the interactions between macroeconomic and financial variables can play a major role in determining the severity and duration of a recession. Specifically, we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions.— Stijn Claessens, M. Ayhan Kose and Marco E. Terrones

Suggested Citation

  • Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2009. "What happens during recessions, crunches and busts? [Business cycles for G-7 and European countries]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(60), pages 653-700.
    • Handle: RePEc:oup:ecpoli:v:24:y:2009:i:60:p:653-700.
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    File URL: http://hdl.handle.net/10.1111/j.1468-0327.2009.00231.x
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    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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