Recession

Recession

Overview
In economics, a recession is a business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

 contraction, a general slowdown in economic activity. During recessions, many macroeconomic
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

 indicators vary in a similar way. Production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization
Capacity utilization
Capacity utilization is a concept in economics and managerial accounting which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity...

, household incomes, business profits, and inflation all fall, while bankruptcies and the unemployment rate rise.

Recessions generally occur when there is a widespread drop in spending, often following an adverse supply shock
Supply shock
A supply shock is an event that suddenly changes the price of a commodity or service. It may be caused by a sudden increase or decrease in the supply of a particular good. This sudden change affects the equilibrium price....

 or the bursting of an economic bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

.
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Encyclopedia
In economics, a recession is a business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

 contraction, a general slowdown in economic activity. During recessions, many macroeconomic
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

 indicators vary in a similar way. Production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization
Capacity utilization
Capacity utilization is a concept in economics and managerial accounting which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity...

, household incomes, business profits, and inflation all fall, while bankruptcies and the unemployment rate rise.

Recessions generally occur when there is a widespread drop in spending, often following an adverse supply shock
Supply shock
A supply shock is an event that suddenly changes the price of a commodity or service. It may be caused by a sudden increase or decrease in the supply of a particular good. This sudden change affects the equilibrium price....

 or the bursting of an economic bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

, increasing government spending and decreasing taxation
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....

.

Definition


In a 1975 New York Times article, economic statistician Julius Shiskin suggested several rules of thumb for defining a recession, one of which was "two down consecutive quarters of GDP". In time, the other rules of thumb were forgotten. Some economists prefer a definition of a 1.5% rise in unemployment within 12 months.

In the United States,the Business Cycle Dating Committee of the National Bureau of Economic Research
National Bureau of Economic Research
The National Bureau of Economic Research is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." The NBER is well known for providing start and end...

 (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP
Real GDP
Real Gross Domestic Product is a macroeconomic measure of the value of output economy adjusted for price changes . The adjustment transforms the money-value measure, called nominal GDP, into an index for quantity of total output...

, real income
Real income
Real income is the income of individuals or nations after adjusting for inflation. It is calculated by subtracting inflation from the nominal income...

, employment, industrial production
Industrial production
Industrial production is a measure of output of the industrial sector of the economy. The industrial sector includes manufacturing, mining, and utilities. Although these sectors contribute only a small portion of GDP , they are highly sensitive to interest rates and consumer demand...

, and wholesale-retail sales." Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession's onset and end.

In the UK recessions are generally defined as 2 successive quarters of negative growth. (or 6 months)

Attributes


A recession has many attributes that can occur simultaneously and includes declines in component measures of economic activity (GDP) such as consumption, investment, government spending, and net export activity. These summary measures reflect underlying drivers such as employment levels and skills, household savings rates, corporate investment decisions, interest rates, demographics, and government policies.

Economist Richard C. Koo
Richard Koo
Richard C. Koo is a Taiwanese economist residing in Japan specializing in balance sheet recessions. He is Chief Economist at the Nomura Research Institute.- Publications :...

 wrote that under ideal conditions, a country's economy should have the household sector as net savers and the corporate sector as net borrowers, with the government budget nearly balanced and net exports near zero. When these relationships become imbalanced, recession can develop within the country or create pressure for recession in another country. Policy responses are often designed to drive the economy back towards this ideal state of balance.

A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression
Depression (economics)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....

, although some argue that their causes and cures can be different. As an informal shorthand, economists sometimes refer to different recession shapes
Recession shapes
Recession shapes are used by economists to describe different types of recessions. There is no specific academic theory or classification system for recession shapes; rather the terminology is used as an informal shorthand to characterize recessions and their recoveries.The most commonly used...

, such as V-shaped, U-shaped, L-shaped and W-shaped recessions.

Type of recession or shape



The type and shape of recessions are distinctive. In the US, V-shaped, or short-and-sharp contractions followed by rapid and sustained recovery, occurred in 1954 and 1990–91; U-shaped (prolonged slump) in 1974–75, and W-shaped, or double-dip recessions in 1949 and 1980–82. Japan’s 1993–94 recession was U-shaped and its 8-out-of-9 quarters of contraction in 1997–99 can be described as L-shaped. Korea, Hong Kong and South-east Asia experienced U-shaped recessions in 1997–98, although Thailand’s eight consecutive quarters of decline should be termed L-shaped.

Psychological aspects


Recessions have psychological and confidence aspects. For example, if the expectation develops that economic activity will slow, firms may decide to reduce employment levels and save money rather than invest. Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession. Consumer confidence is one measure used to evaluate economic sentiment. The term animal spirits
Animal spirits (Keynes)
"Animal spirits" is the term John Maynard Keynes used in his 1936 book The General Theory of Employment, Interest and Money to describe emotions which influence human behavior and can be measured in terms of consumer confidence. Trust is also included or produced by "animal spirits"...

 has been used to describe the psychological factors underlying economic activity. Economist Robert J. Shiller wrote that the term "...refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people."

Balance sheet recession


The bursting of a real estate or financial asset price bubble can cause a recession. For example, economist Richard Koo wrote that Japan's "Great Recession" that began in 1990 was a "balance sheet recession." It was triggered by a collapse in land and stock prices, which caused Japanese firms to have negative equity
Negative equity
Negative equity occurs when the value of an asset used to secure a loan is less than the outstanding balance on the loan. In the United States, assets with negative equity are often referred to as being "underwater", and loans and borrowers with negative equity are said to be "upside down".People...

, meaning their assets were worth less than their liabilities. Despite zero interest rates and expansion of the money supply to encourage borrowing, Japanese corporations in aggregate opted to pay down their debts from their own business earnings rather than borrow to invest as firms typically do. Corporate investment, a key demand component of GDP, fell enormously (22% of GDP) between 1990 and its peak decline in 2003. Japanese firms overall became net savers after 1998, as opposed to borrowers. Koo argues that it was massive fiscal stimulus (borrowing and spending by the government) that offset this decline and enabled Japan to maintain its level of GDP. In his view, this avoided a U.S. type Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

, in which U.S. GDP fell by 46%. He argued that monetary policy was ineffective because there was limited demand for funds while firms paid down their liabilities. In a balance sheet recession, GDP declines by the amount of debt repayment and un-borrowed individual savings, leaving government stimulus spending as the primary remedy.

Liquidity trap


A liquidity trap
Liquidity trap
A liquidity trap is a situation described in Keynesian economics in which injections of cash into an economy by a central bank fail to lower interest rates and hence to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as...

 is a Keynesian theory that a situation can develop in which interest rates reach near zero (ZIRP) yet do not effectively stimulate the economy. In theory, near-zero interest rates should encourage firms and consumers to borrow and spend. However, if too many individuals or corporations focus on saving or paying down debt rather than spending, lower interest rates have less effect on investment and consumption behavior; the lower interest rates are like "pushing on a string." Economist Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...

 described the U.S. 2009 recession
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

 and Japan's lost decade
Lost Decade (Japan)
The is the time after the Japanese asset price bubble's collapse within the Japanese economy, which occurred gradually rather than catastrophically...

 as liquidity traps. One remedy to a liquidity trap is expanding the money supply via quantitative easing
Quantitative easing
Quantitative easing is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy...

 or other techniques in which money is effectively printed to purchase assets, thereby creating inflationary expectations that cause savers to begin spending again. Government stimulus spending and mercantilist
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...

 policies to stimulate exports and reduce imports are other techniques to stimulate demand. He estimated in March 2010 that developed countries representing 70% of the world's GDP were caught in a liquidity trap.

Predictors


Although there are no completely reliable predictors, the following are regarded to be possible predictors.
  • Inverted yield curve, the model developed by economist Jonathan H. Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate. Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator;
  • The three-month change in the unemployment rate and initial jobless claims.
  • Index of Leading (Economic) Indicators
    Index of Leading Indicators
    The Conference Board Leading Economic Index is an American economic leading indicator intended to forecast future economic activity. It is calculated by The Conference Board, a non-governmental organization, which determines the value of the index from the values of ten key variables. These...

     (includes some of the above indicators).
  • Lowering of asset prices, such as homes and financial assets, or high personal and corporate debt levels.

Government responses


Most mainstream economists
Mainstream economics
Mainstream economics is a loose term used to refer to widely-accepted economics as taught in prominent universities and in contrast to heterodox economics...

 believe that recessions are caused by inadequate aggregate demand
Aggregate demand
In macroeconomics, aggregate demand is the total demand for final goods and services in the economy at a given time and price level. It is the amount of goods and services in the economy that will be purchased at all possible price levels. This is the demand for the gross domestic product of a...

 in the economy, and favor the use of expansionary macroeconomic policy during recessions. Strategies favored for moving an economy out of a recession vary depending on which economic school the policymakers follow. Monetarists would favor the use of expansionary monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

, while Keynesian economists may advocate increased government spending
Government spending
Government spending includes all government consumption, investment but excludes transfer payments made by a state. Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is classed as government final...

 to spark economic growth. Supply-side economists may suggest tax cuts to promote business capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

 investment. When interest rates reach the boundary of an interest rate of zero percent
Zero interest rate policy
The zero interest rate policy is a macroeconomic concept describing conditions with a very low interest rate, such as contemporary Japan and, since December 16, 2008, the United States. It can be associated with slow economic growth....

 conventional monetary policy can no longer be used and government must use other measures to stimulate recovery. Keynesians argue that fiscal policy
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....

, tax cuts or increased government spending, will work when monetary policy fails. Spending is more effective because of its larger multiplier
Multiplier (economics)
In economics, the fiscal multiplier is the ratio of a change in national income to the change in government spending that causes it. More generally, the exogenous spending multiplier is the ratio of a change in national income to any autonomous change in spending In economics, the fiscal...

 but tax cuts take effect faster.

Stock market


Some recessions have been anticipated by stock market declines. In Stocks for the Long Run
Stocks for the Long Run
Stocks for the Long Run is a book on investing by Jeremy Siegel. Its first edition was released in 1994. Its fourth edition was released on November 27, 2007...

, Siegel mentions that since 1948, ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months (average 5.7 months), while ten stock market declines of greater than 10% in the DJIA were not followed by a recession.

The real-estate market also usually weakens before a recession. However real-estate declines can last much longer than recessions.

Since the business cycle is very hard to predict, Siegel argues that it is not possible to take advantage of economic cycles for timing investments. Even the National Bureau of Economic Research
National Bureau of Economic Research
The National Bureau of Economic Research is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." The NBER is well known for providing start and end...

 (NBER) takes a few months to determine if a peak or trough has occurred in the US.

During an economic decline, high yield stocks
High yield stocks
A high-yield stock is a stock whose dividend yield is higher than the yield of any benchmark average such as the ten-year US Treasury note. The classification of a high-yield stock is relative to the criteria of any given analyst. Some analysts may consider a 2% dividend yield to be high, while...

 such as fast moving consumer goods
Fast Moving Consumer Goods
Fast moving consumer goods or Consumer Packaged Goods are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as soft drinks, toiletries, and grocery items...

, pharmaceuticals, and tobacco tend to hold up better. However when the economy starts to recover and the bottom of the market has passed (sometimes identified on charts as a MACD
MACD
MACD is a technical analysis indicator created by Gerald Appel in the late 1970s. It is used to spot changes in the strength, direction, momentum, and duration of a trend in a stock's price....

), growth stock
Growth stock
In finance, a growth stock is a stockof a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry...

s tend to recover faster. There is significant disagreement about how health care and utilities tend to recover. Diversifying one's portfolio into international stocks may provide some safety; however, economies that are closely correlated with that of the U.S. may also be affected by a recession in the U.S.

There is a view termed the halfway rule according to which investors start discounting an economic recovery about halfway through a recession. In the 16 U.S. recessions since 1919, the average length has been 13 months, although the recent recessions have been shorter. Thus if the 2008 recession followed the average, the downturn in the stock market would have bottomed around November 2008. The actual US stock market bottom of the 2008 recession was in March 2009.

Politics


Generally an administration gets credit or blame for the state of economy during its time. This has caused disagreements about when a recession actually started. In an economic cycle, a downturn can be considered a consequence of an expansion reaching an unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the causes of specific phases of the cycle.

The 1981 recession is thought to have been caused by the tight-money policy adopted by Paul Volcker
Paul Volcker
Paul Adolph Volcker, Jr. is an American economist. He was the Chairman of the Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States in the 1970s and...

, chairman of the Federal Reserve Board, before Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....

 took office. Reagan supported that policy. Economist Walter Heller
Walter Heller
Walter Wolfgang Heller was a leading American economist of the 1960s, and an influential advisor to President John F. Kennedy as chairman of the Council of Economic Advisors, 1961-64....

, chairman of the Council of Economic Advisers
Council of Economic Advisers
The Council of Economic Advisers is an agency within the Executive Office of the President that advises the President of the United States on economic policy...

 in the 1960s, said that "I call it a Reagan-Volcker-Carter recession. The resulting taming of inflation did, however, set the stage for a robust growth period during Reagan's administration.

Economists usually teach that to some degree recession is unavoidable, and its causes are not well understood. Consequently, modern government administrations attempt to take steps, also not agreed upon, to soften a recession.

Unemployment



The full impact of a recession on employment may not be felt for several quarters. Research in Britain shows that low-skilled, low-educated workers and the young are most vulnerable to unemployment in a downturn. After recessions in Britain in the 1980s and 1990s, it took five years for unemployment to fall back to its original levels. Many companies often expect employment discrimination claims to rise during a recession.

Business


Productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

 tends to fall in the early stages of a recession, then rises again as weaker firms close. The variation in profit
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...

ability between firms rises sharply. Recessions have also provided opportunities for anti-competitive mergers, with a negative impact on the wider economy: the suspension of competition policy in the United States in the 1930s may have extended the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

.

Social effects


The living standards of people dependent on wages and salaries are more affected by recessions than those who rely on fixed income
Fixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....

s or welfare benefits. The loss of a job is known to have a negative impact on the stability of families, and individuals' health and well-being.

Global


There is no commonly accepted definition of a global recession
Global recession
A global recession is a period of global economic slowdown. The International Monetary Fund takes many factors into account when defining a global recession, but it states that global economic growth of 3 percent or less is "equivalent to a global recession".By this measure, four periods since...

, although the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 (IMF) regards periods when global growth is less than 3% to be global recessions. The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative.

Economists at the IMF state that a global recession would take a slowdown in global growth to three percent or less. By this measure, four periods since 1985 qualify: 1990–1993, 1998, 2001–2002 and 2008–2009.

United Kingdom


The most recent recession to affect the United kingdom was the late-2000s recession.

United States


According to economists, since 1854, the U.S. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion. However, since 1980 there have been only eight periods of negative economic growth over one fiscal quarter or more, and four periods considered recessions:
  • July 1981 – November 1982
    Early 1980s recession
    The early 1980s recession describes the severe global economic recession affecting much of the developed world in the late 1970s and early 1980s. The United States and Japan exited recession relatively early, but high unemployment would continue to affect other OECD nations through at least 1985...

    : 14 months
  • July 1990 – March 1991: 8 months
  • March 2001 – November 2001: 8 months
  • December 2007 – June 2009: 18 months


For the past three recessions, the NBER decision has approximately conformed with the definition involving two consecutive quarters of decline. While the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth.

Late 2000s


Official economic data shows that a substantial number of nations are in recession as of early 2009. The US entered a recession at the end of 2007, and 2008 saw many other nations follow suit. The US recession of 2007 ended in June, 2009 as the nation entered the current economic recovery.

United States


The United States housing market correction
United States housing market correction
A United States housing market correction is a market correction or "bubble bursting" of a United States housing bubble; the most recent began following a national home price peak first identified in July 2006. Because realty trades in illiquid markets relative to financial assets such as common...

 (a possible consequence of United States housing bubble
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...

) and subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

 has significantly contributed to a recession.

The 2008/2009 recession saw private consumption fall for the first time in nearly 20 years. This indicates the depth and severity of the current recession. With consumer confidence so low, recovery will take a long time. Consumers in the U.S. have been hard hit by the current recession, with the value of their houses dropping and their pension savings decimated on the stock market. Not only have consumers watched their wealth being eroded – they are now fearing for their jobs as unemployment rises.
U.S. employers shed 63,000 jobs in February 2008, the most in five years. Former Federal Reserve chairman Alan Greenspan said on 6 April 2008 that "There is more than a 50 percent chance the United States could go into recession." On 1 October, the Bureau of Economic Analysis reported that an additional 156,000 jobs had been lost in September. On 29 April 2008, nine US states were declared by Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...

 to be in a recession. In November 2008, employers eliminated 533,000 jobs, the largest single month loss in 34 years. For 2008, an estimated 2.6 million U.S. jobs were eliminated.

The unemployment rate in the US grew to 8.5 percent in March 2009, and there were 5.1 million job losses until March 2009 since the recession began in December 2007. That was about five million more people unemployed compared to just a year prior, which was the largest annual jump in the number of unemployed persons since the 1940s.

Although the US Economy grew in the first quarter by 1%, by June 2008 some analysts stated that due to a protracted credit crisis and "rampant inflation in commodities such as oil, food and steel", the country was nonetheless in a recession. The third quarter of 2008 brought on a GDP retraction of 0.5% the biggest decline since 2001. The 6.4% decline in spending during Q3 on non-durable goods, like clothing and food, was the largest since 1950.

A 17 Nov 2008 report from the Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters, suggested that the recession started in April 2008 and will last 14 months. They project real GDP declining at an annual rate of 2.9% in the fourth quarter and 1.1% in the first quarter of 2009. These forecasts represent significant downward revisions from the forecasts of three months ago.

A 1 December 2008, report from the National Bureau of Economic Research stated that the U.S. has been in a recession since December 2007 (when economic activity peaked), based on a number of measures including job losses, declines in personal income, and declines in real GDP. By July 2009 a growing number of economists believed that the recession may have ended. The National Bureau of Economic Research announced on 20 September 2010 that the 2008/2009 recession ended in June 2009, making it the longest recession since World War II.

Other countries


Many other countries, particularly in Europe, have undergone decreasing rates of GDP growth. Some countries have been able to avoid a recession but have still experienced slower economic activity, such as China. Australia was able to maintain positive growth throughout the late-2000s recession.

See also

  • Buffer Theory
    Buffer Theory
    In the late 1950s a number of European countries decided on a migration policy known as the Buffer theory....

  • Economic depression
    Depression (economics)
    In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....

  • Economic stagnation
    Economic stagnation
    Economic stagnation or economic immobilism, often called simply stagnation or immobilism, is a prolonged period of slow economic growth , usually accompanied by high unemployment. Under some definitions, "slow" means significantly slower than potential growth as estimated by experts in macroeconomics...

  • Stagflation
    Stagflation
    In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...


Causes
  • Crisis theory
    Crisis theory
    Crisis theory is generally associated with Marxian economics. In this context crisis refers to what is called, even currently and outside Marxian theory in many European countries a "conjuncture" or especially sharp bust cycle of the regular boom and bust pattern of what Marxists term "chaotic"...

  • Currency crisis
    Currency crisis
    A currency crisis, which is also called a balance-of-payments crisis, is a sudden devaluation of a currency caused by chronic balance-of-payments deficits which usually ends in a speculative attack in the foreign exchange market. It occurs when the value of a currency changes quickly, undermining...

  • Financial crisis
    Financial crisis
    The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these...

  • Overproduction
    Overproduction
    In economics, overproduction, oversupply or excess of supply refers to excess of supply over demand of products being offered to the market...

  • Underconsumption
    Underconsumption
    In underconsumption theory in economics, recessions and stagnation arise due to inadequate consumer demand relative to the amount produced. The theory has been replaced since the 1930s by Keynesian economics and the theory of aggregate demand, both of which were influenced by...



Effects
  • Bankruptcies
  • Credit crunch
    Credit crunch
    A credit crunch is a reduction in the general availability of loans or a sudden tightening of the conditions required to obtain a loan from the banks. A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates...

    es
  • Deflation (or disinflation
    Disinflation
    Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price level of goods and services in a nation's gross domestic product over time. It is the opposite of reflation. Disinflation occurs when the increase in the “consumer price level” slows down...

    )
  • Foreclosure
    Foreclosure
    Foreclosure is the legal process by which a mortgage lender , or other lien holder, obtains a termination of a mortgage borrower 's equitable right of redemption, either by court order or by operation of law...

    s
  • Unemployment

Specific:
  • Great Depression
    Great Depression
    The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

     – August 1929 to September 1939: the longest (and most severe) recession of the 20th century
  • Financial crisis of 2007-2010- current recession
  • List of recessions in the United States – a list of important recessions in the United States

External links