International Recessions

Fabrizio Perri and Vincenzo Quadrini

No 17201, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The 2008-2009 crisis was characterized by an unprecedented degree of international synchronization as all major industrialized countries experienced large macroeconomic contractions around the date of Lehman bankruptcy. At the same time countries also experienced large and synchronized tightening of credit conditions. We present a two-country model with financial market frictions where a credit tightening can emerge as a self-fulling equilibrium caused by pessimistic but fully rational expectations. As a result of the credit tightening, countries experience large and endogenously synchronized declines in asset prices and economic activity (international recessions). The model suggests that these recessions are more severe if they happen after a prolonged period of credit expansion.

JEL-codes: E3 F3 F41 (search for similar items in EconPapers)
Date: 2011-07
Note: EFG IFM
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Citations: View citations in EconPapers (53)

Published as Fabrizio Perri & Vincenzo Quadrini, 2018. "International Recessions," American Economic Review, vol 108(4-5), pages 935-984.

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Related works:
Journal Article: International Recessions (2018)
Working Paper: International Recessions (2011)
Working Paper: International recessions (2011)
Working Paper: International Recessions (2011)
Working Paper: International Recessions (2011)
Working Paper: International recessions (2010)
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