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How bad will it get? IMF study

Very interesting number crunching by  Dr Gurdgiev that shows just how much of the Irelands woes are global compared to internal over which the Irish  government had had full control.

by Dr Constantin Gurdgiev

Here is a new insight into recessions dynamics. This time from the IMF (see link here)…

What Happens During Recessions, Crunches and Busts? by Stijn Claessens, M. Ayhan Kose, and Marco E. Terrones (IMF WP/08/274) looks at “the linkages between key macroeconomic and financial variables around business and financial cycles for 21 OECD countries over the period 1960–2007.

Data set covers 122 recessions, 112 (28) credit contractions (crunches), 114 (28) episodes of house price declines (busts), 234 (58) episodes of equity price declines (busts).

The authors “find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions... Episodes of credit crunches, house price and equity price busts last much longer than recessions do [4 quarters on average]. For example, a credit crunch episode typically lasts two-and-a-half years and is associated with nearly a 20% decline in credit. A housing bust tends to persist even longer—four-and-a-half years with a 30% fall in real house prices. And an equity price bust lasts some 10 quarters and when it is over, the real value of equities drops by half.”  Link to article with tables

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