The Stock Market Crash Really Did Cause the Great Recession

Roger Farmer

No 19391, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the connection between the stock market and the unemployment rate. I establish three facts. First, the log of the real value of the S&P 500 and the log of a logistic transformation of the unemployment rate are non-stationary cointegrated series. Second, the stock market Granger causes the unemployment rate. Third, the connection between changes in the real value of the stock market and changes in the unemployment rate has remained structurally stable over seventy years. My results establish that the fall in the stock market in the autumn of 2008 provides a plausible causal explanation for the magnitude of the Great Recession.

JEL-codes: E24 E27 E32 (search for similar items in EconPapers)
Date: 2013-08
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as The Stock Market Crash Really Did Cause the Great Recession† Roger E. A. Farmer Oxford Bulletin of Economics and Statistics Volume 77, Issue 5, pages 617–633, October 2015

Downloads: (external link)
http://www.nber.org/papers/w19391.pdf (application/pdf)

Related works:
Journal Article: The Stock Market Crash Really Did Cause the Great Recession (2015)
Working Paper: The Stock Market Crash Really Did Cause the Great Recession (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:19391

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19391

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().