NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Stock Market Crash Really Did Cause the Great Recession

Roger Farmer

NBER Working Paper No. 19391
Issued in August 2013
NBER Program(s):   EFG

This paper studies the connection between the stock market and the unemployment rate. I establish three facts. First, the log of the real value of the S&P 500 and the log of a logistic transformation of the unemployment rate are non-stationary cointegrated series. Second, the stock market Granger causes the unemployment rate. Third, the connection between changes in the real value of the stock market and changes in the unemployment rate has remained structurally stable over seventy years. My results establish that the fall in the stock market in the autumn of 2008 provides a plausible causal explanation for the magnitude of the Great Recession.

download in pdf format
   (267 K)

email paper

This paper was revised on August 4, 2014

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19391

Published: The Stock Market Crash Really Did Cause the Great Recession† Roger E. A. Farmer Oxford Bulletin of Economics and Statistics Volume 77, Issue 5, pages 617–633, October 2015 citation courtesy of

Users who downloaded this paper also downloaded these:
Gordon w19390 The Phillips Curve is Alive and Well: Inflation and the NAIRU During the Slow Recovery
Subrahmanyam and Titman w19383 Financial Market Shocks and the Macroeconomy
Farmer w17479 The Stock Market Crash of 2008 Caused the Great Recession: Theory and Evidence
Aguiar and Amador w19388 Sovereign Debt: A Review
Woodford w19368 Macroeconomic Analysis without the Rational Expectations Hypothesis
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us