Abstract

http://ssrn.com/abstract=1672586
 
 

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After the Fall


Carmen M. Reinhart


Peter G. Peterson Institute for International Economics; National Bureau of Economic Research (NBER)

Vincent R. Reinhart


American Enterprise Institute (AEI)

September 2010

NBER Working Paper No. w16334

Abstract:     
This paper examines the behavior of real GDP (levels and growth rates), unemployment, inflation, bank credit, and real estate prices in a twenty one-year window surrounding selected adverse global and country-specific shocks or events. The episodes include the 1929 stock market crash, the 1973 oil shock, the 2007 U.S. subprime collapse and fifteen severe post-World War II financial crises. The focus is not on the immediate antecedents and aftermath of these events but on longer horizons that compare decades rather than years. While evidence of lost decades, as in the depression of the 1930s, 1980s Latin America and 1990s Japan are not ubiquitous, GDP growth and housing prices are significantly lower and unemployment higher in the ten-year window following the crisis when compared to the decade that preceded it. Inflation is lower after 1929 and in the post-financial crisis decade episodes but notoriously higher after the oil shock. We present evidence that the decade of relative prosperity prior to the fall was importantly fueled by an expansion in credit and rising leverage that spans about 10 years; it is followed by a lengthy period of retrenchment that most often only begins after the crisis and lasts almost as long as the credit surge.

Number of Pages in PDF File: 48

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Date posted: September 7, 2010  

Suggested Citation

Reinhart, Carmen M. and Reinhart, Vincent R., After the Fall (September 2010). NBER Working Paper No. w16334. Available at SSRN: http://ssrn.com/abstract=1672586

Contact Information

Carmen M. Reinhart (Contact Author)
Peter G. Peterson Institute for International Economics ( email )
1750 Massachusetts Avenue, NW
Washington, DC 20036
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Vincent R. Reinhart
American Enterprise Institute (AEI) ( email )
1150 17th Street, N.W.
Washington, DC 20036
United States
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