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Credit Crises, Money and Contractions: an historical view

  • Michael D. Bordo
  • Joseph G. Haubrich

The relatively infrequent nature of major credit distress events makes an historical approach particularly useful. Using a combination of historical narrative and econometric techniques, we identify major periods of credit distress from 1875 to 2007, examine the extent to which credit distress arises as part of the transmission of monetary policy, and document the subsequent effect on output. Using turning points defined by the Harding-Pagan algorithm, we identify and compare the timing, duration, amplitude and co-movement of cycles in money, credit and output. Regressions show that financial distress events exacerbate business cycle downturns both in the nineteenth and twentieth centuries and that a confluence of such events makes recessions even worse.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15389.

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Date of creation: Sep 2009
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Publication status: published as Bordo, Michael D. & Haubrich, Joseph G., 2010. "Credit crises, money and contractions: An historical view," Journal of Monetary Economics, Elsevier, vol. 57(1), pages 1-18, January.
Handle: RePEc:nbr:nberwo:15389
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