1. Introduction Objective  Generally speaking, economists believe that recessions (a decrease in production or GDP) begin with a slump in investment spending by businesses (e.g. buildings, machinery, equipment), which is why the short-run fluctuations in the economy are referred to as the “business cycle.”  Previous research for the U.S. finds that spending on residential investment (housing), a subcategory of investment spending, is below normal leading into recessions and, therefore, contributes significant weakness to the growth rate of GDP as the U.S. economy enters a recession.  Determine whether or not below-normal spending on residential investment (housing) contributed significant weakness to GDP growth leading into the most recent recession for a group of developed countries. Residential Investment & the Business Cycle: International Evidence Residential Investment & the Business Cycle: International Evidence Methods Results  Three countries, in addition to the U.S., showed below-normal (downward-sloping) spending on residential investment prior to the most recent recession: Czech Republic, Greece, Japan.  The remaining three countries (France, Italy, Switzerland) were inconclusive; there did not appear to be significant weakness in just one spending category prior to the most recent recession. Conclusions  Even though below-normal spending on residential investment (housing) played a significant role in the most recent recession in the U.S, this is not observed in the majority of the developed countries examined in this study. A few countries experienced below-normal spending by the government while many others encountered net exports that were below normal.  Further research will investigate whether these cross-country differences can be explained by differences in housing finance structures and/or incentives for homeownership observed across these 18 countries. Acknowledgements  We would like to acknowledge funding support from UW-Eau Claire’s Office of Research and Sponsored Programs and Differential Tuition.  Collect GDP data for 18 countries from the Organization of Economic Cooperation and Development (OECD) database as well as national statistical agencies For each country…  Calculate “normal” contributions to GDP growth for each of the four categories of GDP as well as the subcategory of residential investment Use kernel density estimates to determine the normal contributions  Subtract the normal contribution from the actual contribution to obtain the “abnormal” contribution to GDP growth for each category  Calculate the cumulative abnormal contributions to GDP growth  Create charts to visually represent the cumulative abnormal contributions to GDP growth for each of the four GDP categories as well as the subcategory of residential investment A downward-sloping line means that the contribution of the category/subcategory is below normal. An upward-sloping line means that the contribution of the category/subcategory is above normal. A horizontal line means that the contribution of the category/subcategory is normal.  Inspect the set of charts for each country in order to determine what category/subcategory of GDP was below normal prior to the most recent recession CountryRecession Start DateCountryRecession Start Date Australia2008, 1 st quarterNetherlands2008, 1 st quarter Belgium2008, 2 nd quarterNew Zealand2007, 4 th quarter Canada2007, 3 rd quarterPortugal2007, 1 st quarter Czech Republic2008, 1 st quarterSlovak Republic2008, 1 st quarter France2008, 1 st quarterSouth Korea2008, 1 st quarter Germany2008, 1 st quarterSpain2007, 3 rd quarter Greece2008, 2 nd quarterSweden2007, 4 th quarter Italy2008, 2 nd quarterSwitzerland2007, 4 th quarter Japan2008, 1 st quarterU.S.2008, 1 st quarter  Eleven countries experienced below-normal (downward-sloping) spending in a different component of GDP (e.g. government spending, net exports) prior to the most recent recession. Examples shown below. Other countries with below-normal government spending: South Korea, Portugal Other countries with below-normal spending in net exports: Australia, Belgium, Canada, Germany, Slovak Republic, Spain, Sweden