The ugly and the bad: banking and housing crises strangle output permanently, ordinary recessions do not

Jens Boysen-Hogrefe, Nils Jannsen and Carsten-Patrick Meier

No 1586, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

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 (search for similar items in EconPapers)
JEL-codes: C33 E32 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1586

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