International Recessions / Fabrizio Perri, Vincenzo Quadrini.

Format:

Book

Author/Creator:

Perri, Fabrizio.

Contributor:

National Bureau of Economic Research.

Quadrini, Vincenzo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17201.

NBER working paper series no. w17201

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

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.

Notes:

Print version record

July 2011.