What Happens during Recessions, Crunches and Busts?

68 Pages Posted: 22 Dec 2008

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

M. Ayhan Kose

World Bank; Brookings Institution; Centre for Economic Policy Research (CEPR); Australian National University (ANU)

Marco E. Terrones

International Monetary Fund (IMF)

Multiple version iconThere are 4 versions of this paper

Date Written: December 1, 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: Business cycles, recessions, credit crunches, house prices, equity prices, busts

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 1, 2008). Available at SSRN: https://ssrn.com/abstract=1318825 or http://dx.doi.org/10.2139/ssrn.1318825

Stijn Claessens

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

M. Ayhan Kose (Contact Author)

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Brookings Institution

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Australian National University (ANU)

Canberra, Australian Capital Territory 2601
Australia

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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