Kiel Working Papers, Kiel Institute for World Economics
No 1586:
The Ugly and the Bad: Banking and Housing Crises Strangle Output Permanently, Ordinary Recessions Do Not
Jens Hogrefe, Nils Jannsen and Carsten-Patrick Meier
Abstract: This paper provides statistical evidence suggesting that
in industrial countries, recessions that are associated with either banking
crises or housing crises dampen output far more than ordinary recessions.
Using a parametric panel framework that allows for a bounceback of the
level of output in the course of the cyclical recovery, we find that
ordinary recessions are followed by strong recoveries that make up for
almost all the preceding shortfall in output. This bounceback tends to be
significantly smaller following recessions associated with banking crises
or housing crises. Our paper corroborates the practice of focusing
exclusively on severe crises used in an emerging macroeconomic literature
and integrates it with the earlier literature on recessions and
recoveries
Keywords: business cycle, banking crisis, housing crisis, panel data, asymmetry, persistence; (follow links to similar papers)
JEL-Codes: E32,; C33; (follow links to similar papers)
28 pages, January 2010
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