What Happens During Recessions, Crunches, and Busts?

77 Pages Posted: 18 Dec 2008

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

M. Ayhan Kose

Development Prospects Group at the World Bank

Marco E. Terrones

International Monetary Fund (IMF)

Multiple version iconThere are 4 versions of this paper

Date Written: December 2008

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 analyze the implications of 122 recessions, 112 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 234 (58) episodes of equity price declines (busts) and their various overlaps in these countries over the sample period. Our results indicate that interactions between macroeconomic and financial variables can play major roles in determining the severity and duration of recessions. Specifically, we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions.

Keywords: Economic recession, Business cycles, Financial crisis, Credit, Housing prices, Stock prices, Oil prices, Databases, Economic models

JEL Classification: E32, E44, E51, F42

Suggested Citation

Claessens, Stijn and Kose, M. Ayhan and Terrones, Marco E., What Happens During Recessions, Crunches, and Busts? (December 2008). IMF Working Papers, Vol. , pp. 1-75, 2008. Available at SSRN: https://ssrn.com/abstract=1316742

Stijn Claessens

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

M. Ayhan Kose (Contact Author)

Development Prospects Group at the World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Marco E. Terrones

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4329 (Phone)

HOME PAGE: http://imf.org/external/np/CV/AuthorCV.aspx?AuthID=171

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