Global Recessions Through History

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Global recessions of 1975, 1982, 1991 and 2009 have questioned economists of the specific era to provide the causes of these recessions along with steps to avoid them. IMF considers global recession as “A decline in annual per capita real World GDP (purchasing power parity weighted), backed up by a decline or worsening for one or more of the seven other global macroeconomic indicators: Industrial production, trade, capital flows, oil consumption, unemployment rate, per capita investment, and per capita consumption” (World Economic and Financial Surveys). A recession therefore affects all the countries dependent on an economy undergoing recession. Since decades economists are trying to draft possible measures that an economy can take to avoid recession or to get out of a recession. Constant debates, on which approach an economy should take to get out of recession, have never reached to any conclusion. Mainly there are three schools of thought in economics that emerged during and after recession i.e. classical, monetarist and Keynesian. No school of thought has yet provided a perfect solution as the approaches by these three schools have many pros and cons. However, many economists believe that Keynesian is a more suitable approach for getting an economy out of recession. Although Keynesian approach have policy lags and can cause high inflation, however, Keynesian tools’ expansionary fiscal policy, expansionary monetary policy and revaluation of currency are very effective in increasing GDP ultimately pulling an economy out of recession. One of the tools of Keynesian approach is to adopt expansionary fiscal policy to increase economic activity within economy. Expansionary fiscal policy aims to cut taxes and increase government spend... ... middle of paper ... ...-and-recession-closer/>. Nishizaki, Kenji. "Chronic Deflation in Japan." Bank Of Japan, 2012. Web. 10 May 2014. Blinder, Alan S. "Keynesian Economics." : The Concise Encyclopedia of Economics. Liberty Funds, Inc., n.d. Web. 08 May 2014. . IP, Greg. The Wall Street Journal. Dow Jones & Company, 12 Dec. 2001. Web. 10 May 2014. . "Will It Hurt? Macroeconomics Effects of Fiscal Consolidation." International Monetary Fund. N.p., n.d. Web. 10 May 2014. . Posen, Adam. “The Realities and Relevance of Japan’s Great Recession: Neither Ran NorRashomon.” STICERD Public Lecture, London School of Economics, 24 May 2010

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