Recession (economics): Difference between revisions
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==Terminology== | ==Terminology== | ||
The terms '''recession''' and depression are used colloqually to describe any deep or persistant decline in economic activity, and sometimes to a persistant reduction in the rate of growth of ouput. More precise definitions have been adopted the statistics authorities. In the United States the National Bureau of Economic Research defines a recession as | The terms '''recession''' and depression are used colloqually to describe any deep or persistant decline in economic activity, (and sometimes to a persistant reduction in the rate of growth of ouput). More precise definitions have been adopted the statistics authorities. In the United States the National Bureau of Economic Research defines a recession as | ||
:''a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale retail sales''<ref>[http://faq.bea.gov/cgi-bin/bea.cfg/php/enduser/std_adp.php?p_faqid=485&p_created=1206966790&p_sid=-OCpNEgj&p_accessibility=0&p_redirect=&p_lva=&p_sp=cF9zcmNoPSZwX3NvcnRfYnk9JnBfZ3JpZHNvcnQ9JnBfcm93X2NudD0zODMsMzgzJnBfcHJvZHM9JnBfY2F0cz0mcF9wdj0mcF9jdj0mcF9zZWFyY2hfdHlwZT1hbnN3ZXJzLnNlYXJjaF9ubCZwX3BhZ2U9MQ**&p_li=&p_topview=1 ''Recession: how is that defined?'', Bureau of Economics, US Department of Commerce]</ref><ref>[http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm For a further explanation and some examples see ''What Is a Recession And Are We In One? Federal Reserve Bank of Cleveland October 2008]</ref><br> | :''a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale retail sales''<ref>[http://faq.bea.gov/cgi-bin/bea.cfg/php/enduser/std_adp.php?p_faqid=485&p_created=1206966790&p_sid=-OCpNEgj&p_accessibility=0&p_redirect=&p_lva=&p_sp=cF9zcmNoPSZwX3NvcnRfYnk9JnBfZ3JpZHNvcnQ9JnBfcm93X2NudD0zODMsMzgzJnBfcHJvZHM9JnBfY2F0cz0mcF9wdj0mcF9jdj0mcF9zZWFyY2hfdHlwZT1hbnN3ZXJzLnNlYXJjaF9ubCZwX3BhZ2U9MQ**&p_li=&p_topview=1 ''Recession: how is that defined?'', Bureau of Economics, US Department of Commerce]</ref><ref>[http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm For a further explanation and some examples see ''What Is a Recession And Are We In One? Federal Reserve Bank of Cleveland October 2008]</ref><br> | ||
Other authorities have | Other authorities have not adopted a formal definition of recession but most commentators and analysts use<br> | ||
: a period of of negative growth of GDP lasting for at least two quarters<br> | :'' a period of of negative growth of real (inflation-adjusted GDP lasting for at least two quarters]]''<ref>[http://www.imf.org/external/pubs/ft/fandd/2009/03/basics.htm Stijn Claessens and M. Ayhan Kose: ''What Is a Recession?'', International Monetary Fund, March 2009]</ref>.<br> | ||
Before 1930, what are now termed recessions were referred to as "depressions". That term is nowadays reserved for exceptionally severe or prolonged recessions. | Before 1930, what are now termed recessions were referred to as "depressions". That term is nowadays reserved for exceptionally severe or prolonged recessions. Again there is no formal definition, but the term is reportedly applied to a decline in real GDP that exceeds 10%, or one that lasts more than three years<ref>[http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=12852043 ''Diagnosing depression'', The Economist, Dec 30th 2008 ]</ref>. | ||
==The causes of recessions== | ==The causes of recessions== | ||
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==The costs of recessions== | ==The costs of recessions== | ||
==Recessions in history== | |||
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More commonly, recessions have been brought about by sudden increases of commodity prices, or credit shortages resulting from financial crises. The initial fall in demand usually prompts firms to run down their stocks, which depresses activity among their suppliers. The re-stocking that occurs when consumer demand starts to rise again tends to speed the recovery and, according to the "Zarnowitz rule", the steeper the initial downturn in activity, the more rapid will be the subsequent upturn<ref>Victor Zarnowitz: ''What is a Business Cycle?'', NBER Working Paper No. W3863, National Bureau of Economic Research, October 1991</ref> (but that rule may not hold for balance sheet recessions). | More commonly, recessions have been brought about by sudden increases of commodity prices, or credit shortages resulting from financial crises. The initial fall in demand usually prompts firms to run down their stocks, which depresses activity among their suppliers. The re-stocking that occurs when consumer demand starts to rise again tends to speed the recovery and, according to the "Zarnowitz rule", the steeper the initial downturn in activity, the more rapid will be the subsequent upturn<ref>Victor Zarnowitz: ''What is a Business Cycle?'', NBER Working Paper No. W3863, National Bureau of Economic Research, October 1991</ref> (but that rule may not hold for balance sheet recessions). | ||
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==References== | ==References== | ||
{{reflist}} | |||
Revision as of 05:57, 10 August 2010
Terminology
The terms recession and depression are used colloqually to describe any deep or persistant decline in economic activity, (and sometimes to a persistant reduction in the rate of growth of ouput). More precise definitions have been adopted the statistics authorities. In the United States the National Bureau of Economic Research defines a recession as
- a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale retail sales[1][2]
Other authorities have not adopted a formal definition of recession but most commentators and analysts use
- a period of of negative growth of real (inflation-adjusted GDP lasting for at least two quarters]][3].
Before 1930, what are now termed recessions were referred to as "depressions". That term is nowadays reserved for exceptionally severe or prolonged recessions. Again there is no formal definition, but the term is reportedly applied to a decline in real GDP that exceeds 10%, or one that lasts more than three years[4].
The causes of recessions
What happens in a recession
The treatment of recessions
The costs of recessions
Recessions in history
References
- ↑ Recession: how is that defined?, Bureau of Economics, US Department of Commerce
- ↑ For a further explanation and some examples see What Is a Recession And Are We In One? Federal Reserve Bank of Cleveland October 2008
- ↑ Stijn Claessens and M. Ayhan Kose: What Is a Recession?, International Monetary Fund, March 2009
- ↑ Diagnosing depression, The Economist, Dec 30th 2008