Hostname: page-component-7dd5485656-kp629 Total loading time: 0 Render date: 2025-10-31T00:56:43.663Z Has data issue: false hasContentIssue false
  • English
  • Français

A NOTE ON BANKING AND HOUSING CRISES AND THE STRENGTH OF RECOVERIES

Published online by Cambridge University Press:  10 November 2015

Jens Boysen-Hogrefe ,
Nils Jannsen  and
Carsten-Patrick Meier
Jens Boysen-Hogrefe
Affiliation:
Kiel Institute for the World Economy
Nils Jannsen*
Affiliation:
Kiel Institute for the World Economy
Carsten-Patrick Meier
Affiliation:
Kiel Economics GmbH & Co. KG
*
Address correspondence to: Nils Jannsen, Kiel Institute for the World Economy, 24100 Kiel, Germany; e-mail: nils.jannsen@ifw-kiel.de.
Get access Rights & Permissions [Opens in a new window]

Abstract

We investigate whether recoveries following normal recessions differ from recoveries following recessions that are associated with either banking crises or housing crises. Using a parametric panel framework that allows for a bounce-back in the level of output during the recovery, we find that normal recessions are followed by strong recoveries in advanced economies. This bounce-back is absent following recessions associated with banking crises and housing crises. Consequently, the permanent output losses of recessions associated with banking crises and housing crises are considerably larger than those of normal recessions.

Keywords

Business CycleRecoveryBanking CrisisHousing Crisis

Information

Type
Notes
Information
Macroeconomic Dynamics , Volume 20 , Issue 7 , October 2016 , pp. 1924 - 1933
Copyright
Copyright © Cambridge University Press 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

Ahearne, A.G., Ammer, J., Doyle, B.M., Kole, L.S., and Martin, R.F. (2005) House Prices and Monetary Policy: A Cross-Country Study. International finance discussion paper 841. Board of Governors of the Federal Reserve System, Washington, DC.CrossRefGoogle Scholar
Aßmann, C., Boysen, J.-Hogrefe, and Jannsen, N. (2013) Costs of housing crises: International evidence. Bulletin of Economic Research 65 (4), 299–313.Google Scholar
Balke, N.S. and Mark, A. Wynne (1996) Are deep recessions followed by strong recoveries? Results for the G-7 countries. Applied Economics 28, 889–897.Google Scholar
Beaudry, P. and Koop, G. (1993) Do recessions permanently change output? Journal of Monetary Economics 31, 149–163.Google Scholar
Bordo, M.D., Eichengreen, B., Klingebiel, D., Martinez-Peria, M.S., and Rose, A.K. (2001) Is the crises problem growing more severe? Economic Policy 16 (32), 53–82.Google Scholar
Bordo, M. and Haubrich, J.G. (2012) Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record. Federal Reserve Bank of Cleveland. working paper 12–14.Google Scholar
Boyd, J.H., Kwak, S., and Smith, B.D. (2005) The real output losses associated with modern banking crises. Journal of Money, Credit, and Banking 37 (6), 977–999.Google Scholar
Boysen-Hogrefe, J., Jannsen, N., and Meier, C.-P. (2015) A Note on Banking and Housing Crises and the Strength of Recoveries. Kiel working paper 1984.Google Scholar
Bradley, M.D. and Jansen, D.W. (1997) Nonlinear business cycle dynamics: Cross-country evidence on the persistence of aggregate shocks. Economic Inquiry 35 (July), 495–509.CrossRefGoogle Scholar
Campbell, J.Y. and Mankiw, N.G. (1987) Are output fluctuations transitory? Quarterly Journal of Economics 102, 857–880.Google Scholar
Cecchetti, S.G., Kohler, M., and Upper, C. (2009) Financial Crises and Economic Activity. Working paper 15379, National Bureau of Economic Research, Cambridge, MA.Google Scholar
Cerra, V. and Saxena, S.C. (2005) Growth Dynamics: The Myth of Economic Recovery. Working paper 05/147. International Monetary Fund, Washington, DC.CrossRefGoogle Scholar
Cerra, V. and Saxena, S.C. (2008) Growth dynamics: The myth of economic recovery. American Economic Review 98 (1), 439–457.Google Scholar
Claessens, S., Kose, M.A., and Terrones, M.E. (2009) What happens during recessions, crunches and busts? Economic Policy 24 (60), 653–700.Google Scholar
Cunningham, R. and Kolet, I. (2011) Housing market cycles and duration dependence in the United States and Canada. Applied Economics 43, 569–586.CrossRefGoogle Scholar
Furceri, D. and Mourougane, A. (2009) The Effect of Financial Crises on Potential Output. OECD Economics Department working paper 699. Organization for Economic Co-opera-tion and Development, Paris.Google Scholar
Granger, C.W.J. (2001) Overview of nonlinear macroeconometric empirical models. Macroeconometric Dynamics 5, 466–481.Google Scholar
Hamilton, J.D. (1989) A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica 57 (2), 357–384.Google Scholar
Haugh, D., Ollivaud, P., and Turner, D. (2009) The Macroeconomic Consequences of Banking Crises in OECD Countries. OECD Economics Department working paper 683. Organization for Economic Co-opera-tion and Development, Paris.Google Scholar
Howard, G., Martin, R., and Wilson, B.A. (2011) Are Recoveries from Banking and Financial Crises Really So Different? Board of Governors of the Federal Reserve System, international finance discussion paper 1037.Google Scholar
IMF (International Monetary Fund) (2003) When Bubbles Burst. World Economic Outlook, Washington, DC.Google Scholar
IMF (International Monetary Fund) (2009a) From Recession to Recovery: How Soon and How Strong? World Economic Outlook, Washington, DC.Google Scholar
IMF (International Monetary Fund) (2009b) What's the Damage? Medium-Term Output Dynamics after Financial Crises. World Economic Outlook, Washington, DC.Google Scholar
Jannsen, N. (2010) National and International business cycle effects of housing crises. Applied Economics Quarterly 56 (2), 175–206.Google Scholar
Kaminsky, G.L. and Reinhart, C.M. (1999) The twin crises: The causes of banking and balance-of-payments problems. American Economic Review 89 (3), 473–500.Google Scholar
Kilian, L. and Ohanian, L.E. (2002) Unit roots, trend breaks, and transitory dynamics: A macroeconomic perspective. Macroeconomic Dynamics 6, 614–632.Google Scholar
Kim, C.-J., Morley, J., and Piger, J. (2005) Nonlinearity and the permanent effects of recessions. Journal of Applied Econometrics 20 (2), 291–309.Google Scholar
Laeven, L. and Valencia, F. (2010) Resolution of Banking Crises: The Good, the Bad, and the Ugly. Working paper 2010/146. International Monetary Fund, Washington, DC.Google Scholar
Nelson, C.R. and Plosser, C.I. (1982) Trends and random walks in macroeconomic time series: Some evidence and implications. Journal of Monetary Economics 10, 139–162.Google Scholar
Reinhart, C.M. and Rogoff, K.S. (2008) Is the 2007 US sub-prime financial crisis so different? An international historical comparison. American Economic Review: Papers and Proceedings 98 (2), 339–344.Google Scholar
Reinhart, C.M. and Rogoff, K.S. (2009a) The Aftermath of Financial Crises. Working paper 14656. National Bureau of Economic Research, Cambridge, MA.Google Scholar
Reinhart, C.M. and Rogoff, K.S. (2009b) This Time It's Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press.Google Scholar
Sichel, D.E. (1994) Inventories and the three phases of the business cycle. Journal of Business and Economic Statistics 12 (3), 269–278.Google Scholar