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Discussion Paper Details

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Title: What Happens During Recessions, Crunches and Busts?

Author(s): Stijn Claessens, Ayhan Kose and Marco E Terrones

Publication Date: December 2008

Keyword(s): business cycles, busts, credit crunches, equity prices, house prices and recessions

Programme Area(s): Financial Economics

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.

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Bibliographic Reference

Claessens, S, Kose, A and Terrones, M. 2008. 'What Happens During Recessions, Crunches and Busts?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7085