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Did the Recent Housing Boom Signal the Global Financial Crisis?
Author(s) -
Kemme David M.,
Roy Saktinil
Publication year - 2012
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/0038-4038-78.3.999
Subject(s) - boom , financial crisis , economics , probit model , recession , probit , logit , econometrics , vector autoregression , macroeconomics , engineering , environmental engineering
[Shiller, Robert J., 2005] prediction of the current global crisis followed from two key observations: (i) the recent housing booms in the United States and other advanced countries were not explained by economic fundamentals; and (ii) historically similar financial booms eventually collapsed, leading to recession. This article provides an empirical framework linking [Shiller, Robert J., 2005] observations and crisis prediction. We utilize vector error correction models and panel probit and logit models to show that tracking a single variable, real house prices, was sufficient to predict the current global crisis.