NBER WORKING PAPER SERIES
IS THE 2007 U.S. SUB-PRIME FINANCIAL CRISIS SO DIFFERENT? AN INTERNATIONAL
HISTORICAL COMPARISON
Carmen M. Reinhart
Kenneth S. Rogoff
在线日语Working Paper 13761
www.nber/papers/w13761
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachutts Avenue
Cambridge, MA 02138
January 2008
This paper prepared for the American Economic Review Papers and Proceedings. Reinhart: School of Public Policy and Department of Economics, 4105 Van Munching Hall, University of Maryland, College Park, Maryland 20742; email: creinhar@umd.edu; and Rogoff: Economics Department, 231 Littauer Center, Harvard University, Cambridge MA 02138-3001; email: krogoff@harvard.edu. The authors would like to thank Vincent R. Reinhart and Alan Taylor for their helpful comments. The views expresd herein are tho of the authors and not necessarily tho of the National Bureau of Economic Rearch.
© 2008 by Carmen M. Reinhart and Kenneth S. Rogoff. All rights rerved. Short ctions of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison Carmen M. Reinhart and Kenneth S. Rogoff
NBER Working Paper No. 13761
January 2008
JEL No. E44,F30,N20
common application
ABSTRACT
Is the 2007-2008 U.S. sub-prime mortgage financial crisis truly a new and different phenomena? Our examination of the longer historical record finds stunning qualitative and quantitative parallels to 18 earlier post-war banking cris in industrialized countries. Specifically, the run-up in U.S. equity and housing prices (which, for countries experiencing large capital inflows, stands out as the best leading indicator in the financial crisis literature) cloly tracks the average of the earlier cris. Another important parallel is the inverted v-shape curve for output growth the U.S. experienced as its economy slowed in the eve of the crisis. Among other indicators, the run-up in U.S. public debt and is actually somewhat below the average of other episodes, and its pre-crisis inflation level is also lower. On the other hand, the United States current account deficit trajectory is wor than average. A critical question is whether the U.S. crisis will prove similar to the most vere industrialized-country cris, in which ca growth may fall significantly below trend for an extended period. Or will it prove like one of the milder episodes, where the recovery is relatively fast? Much will depend on how large the shock to the financial system proves to be and, to a lesr extent, on the efficacy of the subquent policy respon.
Carmen M. Reinhart
University of Maryland
School of Public Policy and Department of Economic
4105 Van Munching Hallimportant的用法
四月英文缩写
College Park, MD 20742
and NBER
creinhar@umd.edu英语文章网站
Kenneth S. Rogoff
Thomas D Cabot Professor of Public Policy
Economics Department
Harvard University
Littauer Center 232
Cambridge, MA 02138-3001
and NBER
关于朋友的英语作文krogoff@harvard.edu
I. Introduction
The first major financial crisis of the 21st century involves esoteric instruments, unaware regulators, and skittish investors. It also follows a well-trodden path laid down by centuries of financial folly. Is the “special” problem of sub-prime mortgages this time really different?
awful什么意思chine t中国情侣Our examination of the longer historical record, which is part of a larger effort on currency and debt cris, finds stunning qualitative and quantitative parallels across a number of standard financial crisis indicators. To name a few, the run-up in U.S. equity and housing prices that Graciela L. Kaminsky and Carmen M. Reinhart (1999) find to be the best leading indicators of crisis in countries experiencing large capital inflows cloly tracks the average of the previous eighteen post World War II banking cris in industrial countries. So, too, does the inverted v-shape of real growth in the years prior to the crisis. Despite widespread concern about the effects on national debt of the early
2000s tax cuts, the run-up in U.S. public debt is actually somewhat below the average of other crisis episodes. In contrast, the pattern of United States current account deficits is markedly wor.
At this juncture, the book is still open on the how the current dislocations in the United States will play out. The precedent found in the aftermath of other episodes suggests that the strains can be quite vere, depending especially on the initial degree of trauma to the financial system (and to some extent, the policy respon). The average drop in (real per capita) output growth is over 2 percent, and it typically takes two years
to return to trend. For the five most catastrophic cas (which include episodes in Finland, Japan, Norway, Spain and Sweden), the drop in annual output growth from peak to trough is over 5 percent, and growth remained well below pre-crisis trend even after three years. The more catastrophic cas, of cour, mark the boundary that policymakers particularly want to avoid.
II. Post War Bank-Centered Financial Cris: The Data Our comparisons employ a small piece of a much larger and longer historical data t we have constructed (e Reinhart and Kenneth S. Rogoff, 2008.) The extended data t catalogues banking and financial cris around the entire world dating back to 1800 (in some cas earlier). In order to focus here on data most relevant to pr
subtlety
ent U.S. situation, we do not consider the plethora of emerging market cris, nor industrialized country financial cris from the Great Depression or the 1800s. Nevertheless, even in the smaller sample considered in this paper, the refrain that “this time is different” syndrome has been repeated many times.
First come rationalizations. This time, many analysts argued, the huge run-up in U.S. housing prices was not at all a bubble, but rather justified by financial innovation (including to sub-prime mortgages), as well as by the steady inflow of capital from Asia and petroleum exporters. The huge run-up in equity prices was similarly argued to be sustainable thanks to a surge in U.S. productivity growth a fall in risk that accompanied the “Great Moderation” in macroeconomic volatility. As for the extraordinary string of outsized U.S. current account deficits, which at their peak accounted for more than two-thirds of all the world’s current account surplus, many analysts argued that the, too,
could be justified by new elements of the global economy. Thanks to a combination of a flexible economy and the innovation of the tech boom, the United States could be expected to enjoy superior productivity growth for decades, while superior American know-how meant higher returns on physical and financial investment than foreigners could expect in the United States.
Next comes reality. Starting in the summer of 2007, the United States experienced a striking contraction in wealth, increa in risk spreads, and deterioration in credit market functioning. The 2007 United States sub-prime crisis, of cour, has it roots in falling U.S. housing prices, which have in turn led to higher default levels particularly among less credit-worthy borrowers. The impact of the defaults on the financial ctor has been greatly magnified due to the complex bundling of obligations that was thought to spread risk efficiently. Unfortunately, that innovation also made the resulting instruments extremely nontransparent and illiquid in the face of falling hou prices.
As a benchmark for the 2007 U.S. sub-prime crisis, we draw on data from the eighteen bank-centered financial cris from the post-War period, as identified by Kaminsky and Reinhart (1999), Gerard Caprio et. al. (2005), and Andrew Mullineux (1990).
The crisis episodes include:
graves
The Big Five Cris: Spain (1977), Norway (1987), Finland (1991),
Sweden (1991) and Japan (1992), where the starting year is in parenthesis.
Other Banking and Financial Cris: Australia (1989), Canada (1983),
Denmark (1987), France (1994), Germany (1977), Greece (1991), Iceland
