Falling asset prices 'significantly associated' with onset of G-7 recessions
Asset price drops are significantly associated with the beginning of a recession in G-7 countries, according to an International Monetary Fund (IMF) working paper, which adds that, in particular, the marginal effect of an equity or house price drop on the likelihood of a new recession can be substantial.
In their paper: Do Asset Price Drops Foreshadow Recessions?, John Bluedorn, Jörg Decressin and Marco Terrones, examine the usefulness of asset prices in predicting recessions in the G-7
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