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Rolling recession

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Rolling recession

Rolling recessions describes the continuation of economic situations in which certain sectors of the economy experiences a slowdown or a stagnation including growth itself. On a whole, rolling recession occurs regardless of nationwide or statewide economic recession and the effects may not be in the national economic measures e.g. GDP (Gross Domestic Product).

Contents

What causes Rolling recession?

  • Recession is caused by high interest rates. The limit of liquidity, or the amount of money available to invest in.
  • "With only 7% of the entire world's population, EU trade has 20% of global imports and exports"
  • A Credit crisis means they cut back on the amount of credit the company is ready by financial institutions, decreasing the amount given households and businesses. by increasing the interest rates on these loans, it will eventually turn into more revenue for the company.
  • "During the recession the UK affects the exchange rates, by weakening the pound sterling against other currencies".

    • What types of recessions are there?

  • Boom and Bust Recession
  • Balance Sheet Recession
  • Depression
  • Supple Side Stock Recession
  • Different Shaped Recession

    • What recessions occurred in the past?

    There have been five major recessions that occurred in the 1900s. The specific years were as follows;

  • 1974
  • 1975
  • 1980
  • 1981
  • 1991

    • "1991 was financially the hardest year to overcome"

    "During the year of 1990's recession struck by 2.2% increasing nearly 1% from 1974 and 1991"

    "Through the year of the 1970's oil price shock helped cause larger contractions"

    Harsh recessions in 1950+

  • 1975 - 0.6% fell
  • 1974 & 1991 - 1.4% fell
  • 1981 - 1.5% fell
  • 1980 - 2.1% fell

    • Boom and Bust Recession

    There were recent recession following the recent economic boom taking place in the economic upturn, the economic growth also above, long trend growth rate; this rapid growth has caused inflation.

  • During the time of a boom, consumer confidence level has decreased, this means that there is a decrease in the savings ratio and an increase in private lending.
  • An increase in debt payment leads to consumers changing their behaviour, instead of seeking to borrowing, the consumers pay off their debt leading to the saving ratio to decrease in time.
  • Governments and banks see inflation and notice that it is getting intense, they use this to implement the monetary policy & the fiscal policy.

    • Balance Sheet Recession

    A balance sheet recession happens when companies/banks look over and notice their balance sheet has occurred an error. This is usually caused by a variety of losses. Banks must stop giving money to clients for a short period of time, as this can lead to a decrease in fall in investment spending.

    For example, in 2008 the banks let losses fall, with a decline of money leading in bank liquidity banks in general found it hard to borrow money to keep their business intact, it was hard for banks to find ways of borrowing money for investment due to their previous records, this led to the economy falling into recession despite there being APR.

    Negative Impacts of a Balance Sheet

  • Limited growth
  • Dividend restrictions
  • Takes time to recovery
  • Can last a long time

    • Depression

    Depression can lead to a high increase of unemployment. It is more likely a balance sheet recession can cause depression. Due to falling asset prices and bank losses, this has a large impact on economic activity.

    Recession is common in many countries; it is all part of the business cycle. Depression means there is a fall in economic activity lasting for a number of years. Economists will not agree with depression as they believe it is plagued by declining economic activity However, there are other economists that argue depression continues up until the point that the activity has returned to its original state.

    Supply Side Shock Recession

    As oil prices are increasing, it can cause recession due to the decline in living standards. In this day, there is a high demand of oil, oil has increased in price throughout the years hence the demand for it.

    Negative Impacts of Supply Side Shock Recession

  • Not many people are aware of Supply Side Shock Recession, the world is more dependent on oil than in the 1970s.
  • The increase in oil prices in 2008 was a major factor causing 2008 to be in recession.
  • It has causes aggregate supple to shift, this means businesses can get lower output and higher inflation, this is called "stagflation".
  • "Wage level affect firms"
  • "Productivity of factors, e.g. labour"

    • Different Shaped Recessions

  • V shaped recession means there is a quick process to recovering after a set recession has occurred, V shaped recession is the best case scenario for general businesses.
  • W shaped recession begin with a V shaped recession, however, it then ends up dropping down after notice false recovery. W shaped recession can also be referred to "double-dip recessions", solely because the economy can decrease down before a full recovery can take place. "W shaped recovery means represents the shape of the image above, it measures employment, GDP, industrial output etc".
  • "L shaped recession means when a period of a passive recovery has taken place after a fall in Gross Domestic Product".

    • References

    Rolling recession Wikipedia
    (Text) CC BY-SA


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