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Recession and rebalancing: How the housing and credit crises will impact US real activity

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  • von Arnim, Rudiger

Abstract

This paper assesses how the current housing and credit crisis will impact US real activity, and how recession interacts with adjustment of global imbalances. A simple real-side model with decreasing returns to factors and non-clearing goods and labor markets is disaggregated into traded and non-traded sectors and three regions (US, EU and Asia). A three region model offers two degrees of freedom and six candidate variables for endogeneity in international accounts. Applying standard income and elasticities approaches as well as a less standard "Bretton Woods II" closure in simulations suggests external imbalances can be reduced in the current recession with a mix of fiscal expansion and some Asian real appreciation.

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  • von Arnim, Rudiger, 2009. "Recession and rebalancing: How the housing and credit crises will impact US real activity," Journal of Policy Modeling, Elsevier, vol. 31(3), pages 309-324, May.
    • Handle: RePEc:eee:jpolmo:v:31:y:2009:i:3:p:309-324
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    Cited by:

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    3. Armon Rezai, 2015. "Demand and distribution in integrated economies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1399-1414.
    4. Armon Rezai, 2011. "The Political Economy Implications of General Equilibrium Analysis in Open Economy Macro Models," Working Papers 1111, New School for Social Research, Department of Economics.
    5. Arslan, Yavuz & Kılınç, Mustafa & Turhan, M. İbrahim, 2015. "Global imbalances, current account rebalancing and exchange rate adjustments," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 324-341.
    6. Raymond TORRES, 2010. "Incomplete crisis responses: Socio-economic costs and policy implications," International Labour Review, International Labour Organization, vol. 149(2), pages 227-237, June.
    7. Cripps, F. & Izurieta, A. & Singh, A., 2011. "Global Imbalances, Under-Consumption and Over-Borrowing: The State of the World Economy and Future Policies," Working Papers wp419, Centre for Business Research, University of Cambridge.
    8. Fracasso, Andrea & Schiavo, Stefano, 2009. "Global imbalances, exchange rates adjustment and the crisis: Implications from network analysis," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 601-619, September.
    9. Wadud, I.K.M. Mokhtarul & Bashar, Omar H.M.N. & Ahmed, Huson Joher Ali, 2012. "Monetary policy and the housing market in Australia," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 849-863.

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