Breaking the Link between Housing Cycles, Banking Crises, and Recession

Policy Brief
March 2016

The housing market lies at the center of the biggest banking crises across the world. The recessions that follow these banking crises are generally deeper and longer than others. The collapse of housing prices amid rising unemployment is a major source of inequality. Persaud explains how the nexus between housing, banking, and the economy can be broken. He shows that two modest regulatory changes would result in life insurers and pension funds providing mortgage finance, which would better insulate the economy and homeowners from the housing cycle than financing from banks or markets can. History shows that safer housing finance would do more to make the financial system resilient than all the other recent initiatives combined.

More From

Avinash D. Persaud Former Research Staff

More on This Topic

Working Paper

Anna Gelpern (PIIE), Sebastian Horn (Kiel Institute for the World Economy), Scott Morris (Center for Global Development), Brad Parks (AidData; Center for Global Development) and Christoph Trebesch (University of Kiel; Kiel Institute for the World Economy)

May 2021
RealTime Economic Issues Watch

Mark Carney (UN Special Envoy for Climate Action and Finance)

December 15, 2020