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Market Responses to the Panic of 2008

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Lucas Threinen

Temple University - Department of Accounting

October 2008

NBER Working Paper No. w14446

We model the panic of 2008 as part of the wealth and substitution effects deriving from a housing price crash that began in 2006. The dissipation of the wealth effect stimulates a reorganization of the banking industry and increases in employment, GDP, and unemployment. The release of resources from the housing sector lowers investment goods prices, and thereby devalues existing non-residential capital while stimulating non-residential investment. These predictions are compared with measured U.S. economic performance from 2006 to 2008 Q2.

Number of Pages in PDF File: 34

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Date posted: October 31, 2008  

Suggested Citation

Mulligan, Casey B. and Threinen, Lucas, Market Responses to the Panic of 2008 (October 2008). NBER Working Paper No. w14446. Available at SSRN: http://ssrn.com/abstract=1292609

Contact Information

Casey B. Mulligan (Contact Author)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
University of Chicago ( email )
1126 East 59th Street
Chicago, IL 60637
United States
773-702-9017 (Phone)
773-702-8490 (Fax)
Lucas Threinen
Temple University - Department of Accounting ( email )
Philadelphia, PA 19122
United States

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