Market Responses to the Panic of 2008

Casey Mulligan and Luke Threinen

No 14446, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We model the panic of 2008 as part of the wealth and substitution effects deriving from a housing price crash that began in 2006. The dissipation of the wealth effect stimulates a reorganization of the banking industry and increases in employment, GDP, and unemployment. The release of resources from the housing sector lowers investment goods prices, and thereby devalues existing non-residential capital while stimulating non-residential investment. These predictions are compared with measured U.S. economic performance from 2006 to 2008 Q2.

JEL-codes: E20 E32 R21 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-bec, nep-mac and nep-ure
Note: EFG ME PE
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Citations: View citations in EconPapers (10)

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