In an economy, a
Recession generally occurs when there is a widespread decrease in expenditure (adverse demand shocks). This can be triggered by various events, such as financial crises, external trade shocks, bad supply shocks or economic bubble bursts. Governments typically respond to recession by adopting expansive macroeconomic policies, such as increasing the money supply, increasing government spending and reducing taxation.
Video Recession
Definisi
In the 1979 New York Times article, economic statistician Julius Shiskin suggested some rules of thumb for defining recessions, one of which is two consecutive quarters of GDP. In time, other rules of the game are forgotten. Some economists prefer the definition of a 1.5-2 percentage point increase in unemployment within 12 months.
In the United States, the Business Cycle Dating Committee of the National Economic Research Bureau (NBER) is generally seen as an authority to commemorate the US recession. The NBER defines the economic recession as: "a significant drop in economic activity spread across the economy, lasting more than a few months, usually seen in real GDP, real income, employment, industrial production, and wholesale-retail sales." Almost universally, academics, economists, policy makers, and businesses are subject to NBER determination to determine the exact dates and onset of recessions.
In the UK, the recession is generally defined as two consecutive quarters of negative economic growth, as measured by seasonal quarter-to-quarter figures adjusted for real GDP. The same definition of recession applies to all EU member states.
Maps Recession
Attributes
Recessions have many attributes that can occur simultaneously and include a decrease in the size of components of economic activity (GDP) such as consumption, investment, government spending, and net exports activity. These summary steps reflect underlying drivers such as level and job skills, household savings rates, corporate investment decisions, interest rates, demographics, and government policies.
Economist Richard C. Koo writes that under ideal circumstances, a country's economy should have the household sector as a net saver and the corporate sector as a net borrower, with a near-balanced government budget and net exports close to zero. When these relationships become unbalanced, the recession may develop within the country or create pressure for recession in other countries. Policy responses are often designed to push the economy back into this ideal balance state.
A severe decline (GDP down 10%) or prolonged (three or four years) is referred to as an economic depression, although some argue that the causes and cures may be different. As an informal abbreviation, economists sometimes refer to different forms of recession, such as V-shaped, U-shaped, L-shaped, and W-shaped.
Type of recession or form
The types and forms of recession are very different. 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 deterioration) in 1974-75, and W-shaped, or double-dip recessions in 1949 and 1980-82. The 1993-1994 Japanese recession was a U-shaped and 8-out-of-9 quarter contraction in 1997-99 can be described as L-shaped. Korea, Hong Kong and Southeast Asia experienced a U-shaped recession in 1997-98, although a decline in eight consecutive quarters in Thailand should be called L-shaped.
Psychological aspects
Recession has psychological aspects and beliefs. For example, if companies expect economic activity to slow down, they can reduce employment rates and save money rather than invest. Such expectations can create a downward cycle that strengthens, brings or worsens recession. Consumer confidence is one of the measures used to evaluate economic sentiment. The term animal spirit has been used to describe the underlying psychological factors of economic activity. Economist Robert J. Shiller writes that the term "... also refers to the trust we have with each other, the sense of justice in economic relationships, and our sense of the level of corruption and bad faith.When animal spirits in ebb, want to spend and businesses do not want to spend capital or hire people. "
Recession balance
A high level of debt or a burst of real estate or financial asset bubble can lead to so-called "financial balance recessions". This is when large numbers of consumers or companies pay debt (ie, save) rather than spend or invest, which slows the economy. The long-term balance is derived from an accounting identity that states that an asset should always be equal to the amount of liabilities plus equity. If asset prices fall below the value of the debt issued to buy them, then the equity should be negative, which means the consumer or corporation goes bankrupt. Economist Paul Krugman wrote in 2014 that "the best working hypothesis seems to be that the financial crisis is just one manifestation of the wider problem of excessive debt - that it is the so-called" balance sheet recession. "In Krugman's view, such a crisis requires a debt reduction strategy combined with higher government spending to offset a decline from the private sector for repaying its debt.
For example, economist Richard Koo writes that Japan's "Great Recession" that began in 1990 was a "financial account recession". It was triggered by a fall in land and stock prices, which caused Japanese firms to have negative equity, meaning their assets were worth less than their obligations. Despite the zero interest rate and the expansion of the money supply to encourage loans, Japanese companies aggregate to pay their debts from their own business income rather than borrow to invest as the company does. The company's investment, the main demand component of GDP, fell substantially (22% of GDP) between 1990 and its peak decline in 2003. Japanese companies overall became net savers after 1998, compared to borrowers. Koo argues that it is a massive fiscal stimulus (loans and government spending) that offset this decline and allow Japan to maintain its GDP rate. In his view, this avoids the Great Depression of the US, where US GDP fell by 46%. He argues that monetary policy is ineffective because there is limited demand for funds while companies pay their obligations. In the balance sheet recession, GDP declines as the amount of debt payments and individual savings that are not borrowed, leaving government stimulus spending as the main cure.
Krugman discussed the concept of a balance sheet recession during 2010, approving the assessment of Koo's situation and seeing that spending on a sustainable deficit when faced with a balance sheet recession would be appropriate. However, Krugman argues that monetary policy can also influence saving behavior, because inflation or credible promises of future inflation (resulting in negative real interest rates) will encourage less savings. In other words, people tend to spend more than saving if they believe inflation is on the horizon. In more technical terms, Krugman argues that the private sector savings curve is elastic even during a balance sheet recession (responsive to changes in real interest rates) disagreeing with Koo's view that he is not elastic (unresponsive to changes in real interest rates).
A July 2012 survey of balance sheet recession research reports that consumer and employment demand is influenced by household leverage levels. Both durable and non-durable goods consumption decreased as households moved from low to high levels with declining property values ​​experienced during the subprime mortgage crisis. Furthermore, reducing consumption due to higher household leverage can lead to a significant decrease in employment rates. Policies that help reduce mortgage debt or household leverage can therefore have a stimulative effect.
Liquidity trap
The liquidity trap is a Keynesian theory that the situation can develop where the interest rate reaches zero (zero interest rate policy) but does not effectively stimulate the economy. In theory, interest rates close to zero should encourage companies and consumers to borrow and spend. However, if too many individuals or companies are focused on saving or paying debt rather than spending, lower interest rates have less effect on investment and consumption behavior; Lower interest rates such as "push strings." Economist Paul Krugman describes the US recession of 2009 and the decade of Japan lost as a trap of liquidity. One cure for liquidity traps is to expand the money supply through quantitative easing or other techniques in which money is effectively printed to buy assets, thus creating inflation expectations that cause savers to start spending again. Government stimulus spending and mercantilist policies to stimulate exports and reduce imports are another technique to stimulate demand. He estimated in March 2010 that developed countries representing 70% of world GDP are caught in a liquidity trap.
Savings and deleveraging paradox
Behavior that may be optimal for an individual (eg, saving more during bad economic conditions) can be detrimental if too many people pursue the same behavior, because in the end one person's consumption is the income of another. Too many consumers who try to save (or pay debts) simultaneously are called savings paradoxes and can cause or deepen the recession. Economist Hyman Minsky also described the "paradox of deleveraging" as a financial institution with too much influence (debt relative to equity) can not be de-leveraged simultaneously without a significant drop in the value of their assets.
During April 2009, US Federal Reserve Deputy Chairman Janet Yellen discussed these paradoxes: "As the big credit crisis strikes, it does not take long before we are in a recession, in turn, deepening the credit crisis as demand and jobs fall, and financial institution credit losses soared.In fact, we have been in the grip of this adverse feedback loop for more than a year. A process of circulating the balance sheet has spread to almost every corner of the economy on purchases, especially on durable goods, to build savings Businesses cancels planned investments and lays off workers to save cash, and financial institutions shrink assets to raise capital and increase their chances of tackling the current storm.Again, Minsky understands this dynamic. He talks about the deleveraging paradox, where precautions might be smart for individuals and companies - and indeed it is important to restore the y economy to its normal state - but it magnifies overall economic pressure. "
Predictors
There are no fully reliable predictors, but the following are considered possible predictors.
- The reversed yield curve, a model developed by economist Jonathan H. Wright, uses 10-year and three-month Treasury securities yields and Fed overnight rates. Another model developed by the Federal Reserve Bank of New York economists uses only 10-year/three-month spreads. However, this is not a sure indicator;
- Three-month change in the unemployment rate and initial jobless claims.
- Leading Indicator Index (Economy) (including some indicators above).
- Lower asset prices, such as houses and financial assets, or high levels of personal and corporate debt.
Government response
Most mainstream economists believe that recession is caused by inadequate aggregate demand in the economy, and supports the use of expansive macroeconomic policies during the recession. The preferred strategy for moving the economy out of recession varies depending on which school of economics is followed by policymakers. Monetaris will support the use of expansive monetary policy, while Keynesian economists may advocate an increase in government spending to spur economic growth. The supply-side economist may suggest tax cuts to promote business capital investment. When interest rates reach zero percent interest rate (interest-free policy), conventional monetary policy is no longer usable and the government must use other measures to stimulate recovery. Keynesians argue that fiscal policy - tax cuts or increased government spending - works when monetary policy fails. Spending is more effective because of its larger multipliers but tax cuts affect faster.
For example, Paul Krugman wrote in December 2010 that significant and sustained government spending is necessary because debt-indebted households pay off debts and can not bring the US economy as before: "The root of our current problem lies in the debt of American families running during the housing bubble era -Bush... Americans who are deeply in debt not only can not spend it as they once were, they have to pay the debt they spend in bubble years.This will be fine if others take a leeway But what really happens is that some people spend less while nobody spends more - and this translates into a depressed economy and high unemployment.What a government should do in this situation is to spend more while the private sector spends less, supports the work while the debt is paid Da n government spending needs to be maintained... "
Stock market
Some recession has been anticipated by a decline in the stock market. In Long Term Stocks , Siegel mentions that since 1948, ten recessions were preceded by a decline in the stock market, with lead times of 0 to 13 months (average 5.7 months), while ten stock markets declined more from 10% in the Dow Jones Industrial Average not followed by a recession.
The real estate market is also usually weakened before the recession. But the decline in real estate can last longer than the recession.
Because the business cycle is so unpredictable, Siegel argues that it is impossible to capitalize on the economic cycle for time investment. Even the National Economic Research Bureau (NBER) takes several months to determine whether a peak or slope has occurred in the US.
During the economic downturn, high yield stocks such as fast moving consumer goods, pharmaceuticals, and tobacco tend to survive better. However, when the economy starts to recover and the bottom of the market has passed (sometimes identified on the chart as MACD), stock growth tends to recover faster. There are significant disagreements about how health care and utilities tend to recover. Diversifying one's portfolio into international stock can provide some security; however, an economy that is closely correlated with the US may also be affected by the US recession.
There is a view called half the rules that investors say are beginning to discount the economic recovery about half way through the recession. In 16 US recessions since 1919, the average length is 13 months, although recent recession is shorter. So if the 2008 recession follows the averages, the decline in the stock market will hit its lowest point around November 2008. The actual US stock market bottom in the 2008 recession is March 2009.
Politics
Generally an administration gets credit or blames the state of the economy during its time. This has caused a dispute about actually begun. In the economic cycle, the decline can be regarded as a consequence of an expansion that reaches an unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the cause of certain phases of the cycle.
The 1981 recession was allegedly caused by a tight money policy adopted by Paul Volcker, chairman of the Federal Reserve Board, before Ronald Reagan took office. Reagan supported the policy. Economist Walter Heller, chairman of the Economic Advisory Board in the 1960s, said that "I call it the recession of Reagan-Volcker-Carter, thus taming inflation indeed, setting the stage for a period of strong growth during the Reagan administration.
Economists usually teach that at some level, recession is inevitable, and the cause is not well understood. As a result, modern governments are trying to take measures, nor are they approved, to soften the recession.
Consequences
Unemployment
Unemployment is very high during the recession. Many economists working in the neoclassical paradigm argue that there is a natural rate of unemployment, which, when subtracted from the actual unemployment rate, can be used to calculate the negative GDP gap during the recession. In other words, unemployment never reaches 0 percent, and thus is not a negative indicator of economic health except above "natural rate", in this case directly corresponding to losses in gross domestic product, or GDP.
The full impact of the recession on employment may not be felt for several quarters. Research in the UK shows that low-skilled, low-educated and young workers are most vulnerable to unemployment in declining conditions. After the recession in Britain in the 1980s and 1990s, it took five years for unemployment to fall back to its original level. Many companies often expect increased employment discrimination claims during the recession.
Business
Productivity tends to fall in the early stages of a recession, then rise again as weaker firms shut down. Variations in profitability between firms increased sharply. The recession also provides an opportunity for an anti-competitive merger, with a negative impact on the wider economy: the postponement of competition policy in the United States in the 1930s may have extended the Great Depression.
Social effects
The living standards of people who depend on wages and salaries are no more affected by the recession than those who rely on fixed income or welfare benefits. Job losses are known to have a negative impact on family stability, and the health and well-being of individuals. The benefits of fixed income receive small pieces that make it more difficult to survive.
History
Global
According to the International Monetary Fund (IMF), "The global recession appears to occur during cycles lasting between eight and 10 years." The IMF takes into account many factors when defining a global recession. Until April 2009, the IMF has been communicated to the press several times, that the annual global real GDP growth of 3.0 percent or less in their view is "... equivalent to a global recession." With this measure, six periods since 1970 qualify: 1974-1975, 1980-1983, 1990-1993, 1998, 2001-2002, and 2008-2009. During what the IMF in April 2002 called the last three global recessions of the last three decades, global per capita output growth was zero or negative, and the IMF argued - at the time - that since the reverse was found for 2001, the state economy in this year with itself does not qualify as a
In April 2009, the IMF has changed the definition of their Global Recession to:
- The annual decline in real world GDP per capita (weighted purchasing power parity), supported by the decline or deterioration of one or more of the seven other global macroeconomic indicators: Industrial production, trade, capital flows, oil consumption, unemployment, per capita investment, and per capita consumption.
With this new definition, a total of four global recessions occurred since World War II: 1975, 1982, 1991 and 2009. All that lasted only one year, although the third would last three years (1991-93) if the IMF as a criterion has used exchange rates normal weighted GDP per capita real world than the weighted purchasing power parity of real world GDP per capita.
Australia
The worst recession ever suffered by Australia occurred in the early 1930s. As a result of the 1920s profits on agriculture and austerity, 1931-1932 saw Australia's biggest recession in its entire history. This fared better than other countries, depressed, but their poor economic situation also affected Australia, which relies on them for exports, as well as foreign investment. The nation also benefited from greater productivity in manufacturing, facilitated by trade protection, which also helped by feeling the effects were lacking.
Due to credit pressures, the economy had experienced a brief recession in 1961 Australia faced an escalating rate of inflation in 1973, caused in part by the oil crisis that occurred in the same year, which brought inflation at a 13% increase. The economic recession struck mid-1974, in the absence of a policy change imposed by the government as a measure to counter the country's economic situation. Consequently, the unemployment rate rises and the trade deficit rises significantly.
Another recession - the most recent to date - occurred in the 1990s, early in the decade. It was the result of a massive stock fall in 1987, in October, now referred to as Black Monday. Although the collapse was greater than that in 1929, the global economy recovered rapidly, but North America still experienced a slowdown in saving and lagging loans, which caused the crisis. The recession is not only limited to America, but also affects partner countries, such as Australia. The unemployment rate increased to 10.8%, employment decreased 3.4% and GDP also decreased by 1.7%. However, inflation was reduced.
United Kingdom
The most recent recession affecting the UK was the recession of the late 2000s.
United States
According to economists, since 1854, the US has experienced 32 cycles of expansion and contraction, 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 during one fiscal quarter or more, and four periods are considered recessions:
- July 1981 - November 1982: 15 months
- July 1990 - March 1991: 8 months
- March 2001 - November 2001: 8 months
- December 2007 - June 2009: 18 months
During the last three recessions, the NBER decision has roughly corresponded to a definition involving two consecutive quarters of decline. While the 2001 recession did not involve a two-quarter decline in a row, it was preceded by two-quarters of the alternating decline and weak growth.
End of the 2000s
Official economic data shows that large numbers of countries are in recession in early 2009. The US entered a recession in late 2007, and 2008 saw many other countries follow suit. The 2007 US recession ended in June 2009 when the country entered the current economic recovery.
United States
The correction of the United States housing market (the possible consequences of the United States housing bubble) and the subprime mortgage crisis significantly contributed to the recession.
The 2007-2009 recession saw private consumption fall for the first time in almost 20 years. This shows the depth and severity of the current recession. With very low consumer confidence, recovery takes a long time. Consumers in the US have been hit hard by the current recession, with the value of their homes declining and their pension savings diminishing in the stock market. Consumers are not only witnessing their wealth being eroded - they are now afraid of their jobs as unemployment rises.
US employers shed 63,000 jobs in February 2008, the most in five years. Former Federal Reserve chairman Alan Greenspan said on April 6 that "There's more than 50 percent chance the United States can get into recession." On October 1, the Bureau of Economic Analysis reported that 156,000 additional jobs had been lost in September. On April 29, 2008, Moody stated that nine US states are in recession. In November 2008, employers removed 533,000 jobs, the biggest one-month loss in 34 years. For 2008, some 2.6 million jobs in the US 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's about five million more people unemployed than just a year earlier, which is the biggest annual jump in the number of unemployed since the 1940s.
Although the US economy grew in the first quarter by 1%, in June 2008 some analysts stated that due to a prolonged credit crisis and "... widespread inflation in commodities such as oil, food and steel," the country remains in recession. The third quarter of 2008 led to a 0.5% decline in GDP by the biggest decline since 2001. A 6.4% drop in Q3 spending on non-durable items, such as clothing and food, was the largest since 1950.
The November 17, 2008 report from the Federal Reserve Bank of Philadelphia based on a survey of 51 forecasters, indicating that the recession began in April 2008 and will last 14 months. They project real GDP to decline at an annual rate of 2.9% in the fourth quarter and 1.1% in the first quarter of 2009. This forecast represents a significant downward revision of the forecast three months ago.
A December 1, 2008 report from the National Bureau of Economic Research states that the United States has been in recession since December 2007 (when economic activity peaked), based on actions including job losses, declining personal income, and a fall in real GDP. In July 2009 more and more economists believe that the recession may have ended. The National Economic Research Bureau announced on September 20, 2010 that the 2008/2009 recession ended in June 2009, making it the longest recession since World War II.
Other countries
Many other countries, especially in Europe, have experienced negative GDP growth. Some countries have been able to avoid a recession but are still experiencing slower economic activity, such as China. India and Australia were able to maintain positive growth throughout the late 2000s recession.
China suffered a stock market crash, which began with the outbreak of the stock market bubble on July 12, 2015.
See also
References
External links
Moore, Geoffrey H. (2002). "Recession". In David R. Henderson (ed.). Economic Concise Encyclopedia (1st ed.). Library of Economy and Freedom. CS1 maint: Additional text: editor list (link) OCLCÃ, 317650570, 50016270, 163149563Source of the article : Wikipedia
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