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What Happens During Recessions, Crunches and Busts?

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  • Claessens, Stijn
  • Kose, M. Ayhan
  • Terrones, Marco
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.

Suggested Citation

  • Claessens, Stijn & Kose, M. Ayhan & Terrones, Marco, 2008. "What Happens During Recessions, Crunches and Busts?," CEPR Discussion Papers 7085, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7085
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    More about this item

    Keywords

    Business cycles; Recessions; Credit crunches; House prices; Equity prices; Busts;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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