We now proceed to a variety of simple comparisons between the 2007 U.S. crisis and previous episodes. Drawing on the standard literature on financial crises, we look at asset prices, real economic growth, and public debt. We begin in Figure 1 by comparing the run-up in housing prices.
Period T represents the year of the onset of the financial
crisis. By that convention, period T-4 is four years prior to the crisis, and the graph in
each case continues to T+3, except of course in the case of the U.S. 2007 crisis, which
remains in the hands of the fates. 2 The chart confirms the case study literature, showing
the significant run-up in housing prices prior to a financial crisis. Notably, the run-up in
housing prices in the United States exceeds that of the "Big Five".
Figure 2 looks at real rates of growth in equity market price indices. (For the United
States, the index is the S&P 500; Reinhart and Rogoff, 2008, provide the complete listing
for foreign markets.)
Once again, the United States looks like the archetypical crisis country, only more
so. The Big Five crisis countries tended to experience equity price falls earlier on than
the U.S. has, perhaps because the U.S. Federal Reserve pumped in an extraordinary
amount of stimulus in the early part of the most recent episode.
