What Happens During Recessions, Crunches, and Busts?

By Marco E. Terrones, Ayhan Kose, Stijn Claessens. Social Science Research Network, 2008

610 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/6c86d29322d385fa23c02ad3a6713044c6e6187f

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Policies for Macrofinancial Stability: Options to Deal with Real Estate Booms (2011, background): “Again, by contrast, recessions that occur around equity price busts are not significantly more severe or persistent than those that do not (Claessens et al., 2008).”
Income Distribution, Credit and Fiscal Policies in an Agent-Based Keynesian Model (2013, neutral): “15 See Stock and Watson (1999); Napoletano et al. (2006); Claessens et al. (2009) for the empirical properties of the macroeconomic time series; and Dosi (2007) and Bartelsman and Doms (2000) for an account of the main stylized facts concerning ﬁrm and productivity dynamics. investment…”
Monetary Policy, the Financial Cycle and Ultralow Interest Rates (2016, methodology): “Some of those closest in spirit to the analysis performed here include, for instance, Reinhart and Rogoff (2009), Claessens et al (2009), Schularick and Taylor (2012), Mian and Sufi (2014), Mian et al (2016) and Jordà et al (2013)).”
Global liquidity and cross-border bank flows (2017, background): “These data are, however, not publicly available and are only available after Q2, 2012. findings on how domestic financial conditions can affect real outcomes (Claessens et al. 2009).”
How Do Business and Financial Cycles Interact? (2011, background): “In an earlier paper (Claessens et al., 2009), we analyzed the implications of credit crunches and asset price busts for recessions for a sample of advanced countries over the period 1960–2007.”
Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area (2013, background): “This turns out to be a problem because, as Claessens et al. (2008) and Crowe et al. (2011) show, the combination of credit and housing boom episodes ampli es the business cycle and in particular, the bust side of the cycle, measured as the amplitude and duration of recessions.”