lynx   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fip/fedmep/16-3.html
   My bibliography  Save this paper

The Great Recession and Financial Shocks

Author

Listed:
  • Zhen Huo
  • José-Víctor Ríos-Rull
Abstract
A case can be made for the Great Recession being the result of a large financial shock that makes household borrowing difficult. The channel involves large reductions in house prices, which trigger sharp reductions in consumption. {{p}} We discuss the ingredients necessary for a quantitative macroeconomic model to successfully implement such a theory. They include: wealth heterogeneity, where the majority of the population needs to acquire financing to purchase houses despite the large amount of wealth in the economy; sizable real frictions that hinder the transformation of consumption into exports and investment and that constrain the increase of household working hours; and a role for expenditures in contributing to productivity.

Suggested Citation

  • Zhen Huo & José-Víctor Ríos-Rull, 2016. "The Great Recession and Financial Shocks," Economic Policy Paper 16-3, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmep:16-3
    as

    Download full text from publisher

    File URL: https://www.minneapolisfed.org/~/media/files/pubs/eppapers/16-3/epp-16-3-the-great-recession-and-financial-shocks.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kurt Mitman & Gianluca Violante & Greg Kaplan, 2015. "Consumption and House Prices in the Great Recession: Model Meets Evidence," 2015 Meeting Papers 275, Society for Economic Dynamics.
    2. Petrosky-Nadeau, Nicolas & Wasmer, Etienne, 2015. "Macroeconomic dynamics in a model of goods, labor, and credit market frictions," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 97-113.
    3. repec:spo:wpmain:info:hdl:2441/5por5bt92h8l0bc7ls4elmcc0b is not listed on IDEAS
    4. Sebastian Dyrda & José-Víctor Ríos-Rull, 2012. "Models of government expenditure multipliers," Economic Policy Paper 12-2, Federal Reserve Bank of Minneapolis.
    5. repec:hal:spmain:info:hdl:2441/5por5bt92h8l0bc7ls4elmcc0b is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Brianti & Tzuo Hann Law, 2018. "Financial Frictions and Un(der)employment Insurance," 2018 Meeting Papers 1303, Society for Economic Dynamics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huo, Zhen, 2016. "Financial Frictions, Asset Prices, and the Great Recession," CEPR Discussion Papers 11544, C.E.P.R. Discussion Papers.
    2. Johannes Stroebel, 2016. "EconomicDynamics Interview: Johannes Stroebel on real estate dynamics," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 17(2), November.
    3. Albanesi, Stefania & DeGiorgi, Giacomo & Nosal, Jaromir, 2022. "Credit growth and the financial crisis: A new narrative," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 118-139.
    4. Susanne Prantl & Alexandra Spitz-Oener, 2020. "The Impact of Immigration on Competing Natives' Wages: Evidence from German Reunification," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 79-97, March.
    5. Carrillo-Tudela, Carlos & Graber, Michael & Waelde, Klaus, 2018. "Unemployment and vacancy dynamics with imperfect financial markets," Labour Economics, Elsevier, vol. 50(C), pages 128-143.
    6. Petrosky-Nadeau, Nicolas & Wasmer, Etienne & Zeng, Shutian, 2016. "Shopping time," Economics Letters, Elsevier, vol. 143(C), pages 52-60.
    7. repec:hal:spmain:info:hdl:2441/2lcqvok1m996m9pb3ctnmerhpq is not listed on IDEAS
    8. Zhen Huo & Jose-Victor Rios-Rull, 2015. "Tightening Financial Frictions on Households, Recessions, and Price Reallocations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(1), pages 118-139, January.
    9. Ngotran, Duong & Ngo, Tien, 2013. "Retail Sector and Economic Development," MPRA Paper 61590, University Library of Munich, Germany, revised Aug 2014.
    10. Kaplan, Greg & Mitman, Kurt & Violante, Giovanni L., 2020. "Non-durable consumption and housing net worth in the Great Recession: Evidence from easily accessible data," Journal of Public Economics, Elsevier, vol. 189(C).
    11. Caggese, Andrea & Cuñat, Vicente & Metzger, Daniel, 2019. "Firing the wrong workers: Financing constraints and labor misallocation," Journal of Financial Economics, Elsevier, vol. 133(3), pages 589-607.
    12. Branch, William A. & Petrosky-Nadeau, Nicolas & Rocheteau, Guillaume, 2016. "Financial frictions, the housing market, and unemployment," Journal of Economic Theory, Elsevier, vol. 164(C), pages 101-135.
    13. Casares, Miguel & Deidda, Luca & Galdon-Sanchez, Jose E., 2019. "Loan Production And Monetary Policy," Macroeconomic Dynamics, Cambridge University Press, vol. 23(1), pages 101-143, January.
    14. Clymo, Alex, 2020. "Discounts, rationing, and unemployment," European Economic Review, Elsevier, vol. 128(C).
    15. Brand, Thomas & Isoré, Marlène & Tripier, Fabien, 2019. "Uncertainty shocks and firm creation: Search and monitoring in the credit market," Journal of Economic Dynamics and Control, Elsevier, vol. 99(C), pages 19-53.
    16. Nicolas Petrosky-Nadeau & Etienne Wasmer & Philippe Weil, 2021. "When Hosios Meets Phillips: Connecting Efficiency and Stability to Demand Shocks," Working Paper Series 2018-13, Federal Reserve Bank of San Francisco.
    17. repec:hal:spmain:info:hdl:2441/7c8vm7kbos9f08oo90oq51cqrp is not listed on IDEAS
    18. repec:spo:wpmain:info:hdl:2441/3bi2m7jdvh8ft9m3o2c19do3i8 is not listed on IDEAS
    19. Krolikowski, Pawel M. & McCallum, Andrew H., 2021. "Goods-market frictions and international trade," Journal of International Economics, Elsevier, vol. 129(C).
    20. Borys, Paweł & Doligalski, Paweł & Kopiec, Paweł, 2021. "The quantitative importance of technology and demand shocks for unemployment fluctuations in a shopping economy," Economic Modelling, Elsevier, vol. 101(C).
    21. Guerrieri, V. & Uhlig, H., 2016. "Housing and Credit Markets," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1427-1496, Elsevier.
    22. repec:spo:wpecon:info:hdl:2441/3odkm6d3q58fepe1bcv0u5jjpn is not listed on IDEAS
    23. Wouter Den Haan, 2014. "Inventories and the Role of Goods-Market Frictions for Business Cycles," Discussion Papers 1402, Centre for Macroeconomics (CFM).
    24. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2019. "Price Dynamics With Customer Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(1), pages 413-446, February.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmep:16-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jannelle Ruswick The email address of this maintainer does not seem to be valid anymore. Please ask Jannelle Ruswick to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/cfrbmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.
    Лучший частный хостинг