The chart plots the behavior of the Composite Coincident Indicator Index from to Note that the series typically climbs during expansion periods between the trough and the peak of the business cycle and falls during recessions the shaded areas between the peak and the trough.
The NBER a private nonprofit nonpartisan research organization, determines the official dates for business cycles. The NBER website http: A recession is a significant decline in activity spread across the economy, that lasts more than a few months and is visible in industrial production, employment, real income, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Even though economists use a large set of variables to forecast the future behavior of economic activity, none has proven a reliable predictor of whether a recession is going to take place.
Changes in some variables—such as asset prices, the unemployment rate, certain interest rates, and consumer confidence—appear to be useful in predicting recessions, but economists still fall short of accurately forecasting a significant fraction of recessions, let alone predicting their severity in terms of duration and amplitude. There were completed recessions in 21 advanced economies over the — period. Although this sounds like a lot, recessions do not happen frequently.
Indeed, the proportion of time spent in recession—measured by the percentage of quarters a country was in recession over the full sample period—was typically about 10 percent.
Recession: When Bad Times Prevail - Back to Basics: Finance & Development
Although each recession has unique features, recessions often exhibit a number of common characteristics:. In particular, a recession is usually associated with a decline of 2 percent in GDP. In the case of severe recessions, the typical output cost is close to 5 percent. Along with the erosion of house and equity values, recessions tend to be associated with turmoil in financial markets.
Although investment and industrial production fell in every recession, consumption registered a decline in only four out of eight episodes since One question sometimes asked is how a recession compares with a depression, especially the Great Depression of the s. There is no formal definition of depression, but most analysts consider a depression to be an extremely severe recession, in which the decline in GDP exceeds 10 percent.
There have been only a handful of depression episodes in advanced economies since The most recent was in the early s in Finland, which registered a decline in GDP of about 14 percent.
That depression coincided with the breakup of the Soviet Union, a large trading partner of Finland. During the Great Depression, the U. Although the latest recession is obviously severe, its output cost was much smaller than that of the Great Depression. Stijn Claessens is an Assistant Director and M. Letters may be edited. A 17 November report from the Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters, suggested that the recession started in April and would last 14 months.
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These forecasts represent significant downward revisions from the forecasts of three months ago. Many other countries, particularly in Europe, have undergone negative GDP growth.
What are business cycles and how do they affect the economy?
Some countries have been able to avoid a recession but have still experienced slower economic activity, such as China. India and Australia were able to maintain positive growth throughout the lates recession. China had their stock market crash , which began with the popping of the stock market bubble on 12 July From Wikipedia, the free encyclopedia.
Not to be confused with Rescission disambiguation. This article is about a slowdown in economic activity. For other uses, see Recession disambiguation. History of economics Schools of economics Mainstream economics Heterodox economics Economic methodology Economic theory Political economy Microeconomics Macroeconomics International economics Applied economics Mathematical economics Econometrics. Economic systems Economic growth Market National accounting Experimental economics Computational economics Game theory Operations research.
The examples and perspective in this article deal primarily with the United Kingdom and do not represent a worldwide view of the subject. You may improve this article , discuss the issue on the talk page , or create a new article , as appropriate. August Learn how and when to remove this template message.
List of recessions in the United Kingdom. List of recessions in the United States. This article duplicates the scope of other articles. Please discuss this issue on the talk page and edit it to conform with Wikipedia's Manual of Style. This section does not cite any sources. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. February Learn how and when to remove this template message. Retrieved 19 November Archived from the original on 28 March What is a recession?
Archived from the original on 2 November Retrieved 25 October The New York Times. National Bureau of Economic Research.
Archived from the original on 12 October Retrieved 15 April Growth and Change in Asia and the Pacific". Archived from the original on 17 March Retrieved 31 July Retrieved 29 January The Wall Street Journal. Retrieved 26 November The Return of Depression Economics and the Crisis of Financial Variables as Leading Indicators". Stocks for the Long Run: Recession begins at home".
Land Values Research Group. A downturn in the property market, especially in turnover sales of properties, is a leading indicator of recession, with a lead time of up to 9 quarters Shiller 7 June Retrieved 10 April Where to put your money now. New ESRC report on the impact of recession on people's jobs, businesses and daily lives". Economic and Social Research Council. Archived from the original on 2 January Retrieved 22 January Archived from the original on March 21, Retrieved 16 April Retrieved 17 September Crisis and Recovery" PDF.
Retrieved 6 February Retrieved 26 April When will it End?
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Loses , Jobs in Biggest Drop Since ". Federal Reserve Bank of Cleveland". Archived from the original on 5 October Financial News — Yahoo! Finance Archived July 7, , at the Wayback Machine. Economy Contracts Most Since the Recession". Economic theory Political economy Applied economics. Economic systems Microfoundations Mathematical economics Econometrics Computational economics Experimental economics Publications.
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