Sunday, April 29, 2007

Why Do Recessions Last a Long Time?

See also: How Long Do Recessions last?

A recession is a period of negative economic growth for 2 consecutive quarters. There are fears that the US economy is heading towards recession in either 2007 or 2008. See: US economy Recession?

There are various factors that determine the length of a recession. These include:

  • Effectiveness of Monetary and Fiscal Policy
  • Effect on Consumer Confidence
  • Response of the Government.
  • What Causes Recession, is it Demand side shock, supply side shock, or a combination of both.
  • How flexible are Labour Markets?
  • Will increased Government spending lead to crowding out.
For more information see this essay: Problems of Recovering from Recession

1 comment:

The Investment Scientist said...

On average, a recession lasted about 10 months. The longest recession was the '74 recession. It lasted a total of 16 months. That recession was a global recession triggered by the Arab-Israeli war and the ensuing Arab Oil Embargo. The shortest recession was the '80 recession which lasted for only 6 months. I did a study of recessions and stock market performance since 1950. I posted the study on my blog The Investment Scientist.