IMF Finance & Development: When Crisis Collide

Author/Editor: Claessens, Stijn, Kose, M. Ayhan, and Terrones, Marco E.

Summary: The financial turmoil that started in the United States has already affected the real economy in countries around the globe. But how severe the impact will be and how prolonged the resulting recession is a matter of intense debate among economists. This debate has highlighted a number of questions about the linkages between the financial sector and the real economy during recessions. For example, how do macroeconomic and financial variables behave during recessions, credit crunches, and asset (house and equity) price busts? And are recessions associated with credit crunches and asset price busts different from other recessions?

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