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澳洲大学经济专业term paper
经济衰退
经济衰退的结果是减少了全球市场的产品需求。经济衰退也通常由于缺乏产品需求，而造成通货紧缩而与价格下跌联系在一起。在西方它也可能是通货膨胀的结果,常伴有价格上涨和经济增长停滞不前。
西方,特别是美国的经济衰退对我们国家来说是一个非常坏的消息。我们印度的公司大多数的外包交易来自美国。甚至这些年我们对美国出口一直在增加，而1月份的出口下降了22%。西方经济的衰退,导致了不景气市场的下滑。这使得新工作大幅度减少，也是引起印度关心的一个原因。西方公司开始大幅度减少晋升、薪酬和员工的福利。一些公司还削减了工作岗位。私营公司以及政府部门都不愿接受任何新的项目。这些公司现在仅仅运营现有额项目工作。预测表明,超过一千万人可能会失去他们的工作。
The result of reduction
Recession
Recessions are the result of reduction in the demand of products in the global market. Recession can also be associated with falling prices known as deflation due to lack of demand of products. Again it could be the result of inflation or a combination of increasing prices and stagnant economic growth in the west.
Recession in the west, especially the United States, is a very bad news for our country. Our companies in India have most outsourcing deals from the us. Even our exports to us have increased over the years. Exports for January have declined by 22 percent. The recession in the west, has resulted in the decline of the recession market. This has resulted in significant drop in the new hiring which is a cause of concern for India. There has been significant cut in promotions, compensation and perks of the employees. Some companies have also cut the jobs. Companies in the private as well as in government sector are hesitant to take up any new projects. The companies are working on the existing projects only. The projections indicate that more than one crore people could lose their jobs .the one crore figure has been compiled by federation of Indian export organisations (FIEO), which says that it carried an intensive survey. The textile, garment and handicraft industry are worse affected. The tourism has also been affected. The real estate has also liquidity problem, where the developers are finding it difficult to raise finances. IT industries , financial sectors , real estate owners , car industry , investment banking and other industries as well are confronting heavy loss due to fall in the global economy. Federation of Indian chambers of commerce and industry (FICCI) found that faced with the global recession, inventories industries like garment, gems textiles, chemicals and jewellery had cut production by 10 % up to 50%.
WHAT CAUSES IT
An economy that grows over a period of time tends to slow down the growth as a part of the normal economic cycle. An economy typically expands for 6- 10 years and tends to go into recession for about six months to two years. A recession takes place when consumers lose confidence in growth of the economy and spend less. This leads to the decrease in demand for goods and services, which in turn leads to the decrease in production, layoffs and a sharp rise in unemployment. Investors are cautious at the time and tend to spend less as they fear stock values will fall and thus stock markets fall on negative sentiment.
"The risk of a recession in the us in 2008 is high and rising. if the US goes into recession , you are going to feel it in Asia. You are going to feel it in India ". The crisis in US would serve as a wakeup call for the central banks all around the world.
Recession should not be confused with depression. Recession means slow down or slump or temporary collapse of a business activity. In its earlier it could be controlled in a methodical manner. Experience helps to avert total collapse. Unchecked, it leads to severe depression. Depression is the dead end. It is the stage of irrevocable economic failure.
When a country is doing well it shows in the growing GDP. Overall economy is bullish. Only stock exchanges don't tell us the rags to riches story but even small businesses. It all adds to the national exchequer. An economist can give a detailed definition of recession but for a layman who has been affected knows is it only one way, when he loses his job and has no money to pay his credits and loans. Recession is when consumer faces foreclosure and the banker comes for his credits. Many companies or whole countries go bankrupt for want of money (liquid funds) and cash flow for even the daily requirements.
Firms face closure when they go through recession as they are not able to recover from losses. If at that time they are not able to sustain their prices and stocks then there is more trouble. Even when the recession period gets over, they may not be able to do well. If a business survives a recession period they should be able to survive a depression. Who will eventually survive recession.
Those that have been able to save their funds.
Those who have not invested in fly by night companies.
Those who remain calm till the recession passes
Those that take stock immediately and decide to reinvest in a recession proof business.
IDENTIFYING THE RECESSION
In 1975 New York times article, economic statistician, "Julius siskin" gave few rules of thumb to identify a recession; one of the rule included the rule of "two successive quarterly declines in GDP. Over the times other rules given by Julius have been largely forgotten and a recession is now identified as the reduction of countries GDP (or negative real economic growth) for at least two quarters. Some economists prefer to interpret it this way like, 1.5 % rise in unemployment within 12 months.
In the United States the business cycle dating committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating recessions. The NBER defines an economic recession as "a significant decline in the economic activity spread across the country lasting more than a few months, normally visible in real GDP growth, real personal income, employment (nonfarm payrolls), industrial production, and wholesale retail sales". Almost all academic economists, policy makers and businesses refer to the determination by the NBER for the precise dating of recession's onset and end.
ATTRIBUTES
A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment and corporate profits.
A severe or prolonged recession is referred to as an economic depression where GDP is down by 10 % recession is prolonged i.e. three to four years.
CAUSES OF RECESSION
Currency crisis
Energy crisis
War
Under consumption
Overproduction
Financial crisis
Price of fuels
EFFECTS OF RECESSION
Bankruptcies
Credit crunches
Deflation ( or disinflation)
Foreclosures
Unemployment
STOCK MARKET AND RECESSIONS
Some recessions have been anticipated by stock market declines. Siegel mentions that since 1948 , ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months ( avg. 5.7 months ) while ten stock market declines of greater than 10% in the DJIA were not followed by a recession.
The real estate market also weakens before a recession. However real estate declines can last much longer than recessions.
During the decline, high yield stocks such as FMCGs, pharmaceuticals and tobacco tend to hold better. However when things begin to improve, these growth stocks tend to recover faster.
RECESSION AND POLITICS
Usually what happens, the administration gets the credit or blame for the state of economy during its time.
E.g. the recession of 1981 is considered to have been caused by the policies of Paul Volcker. He was the chairman of the Federal Reserve board. He adopted tight money policy. Ronald Reagan the then president of US supported that policy. Economist Walter Heller, chairman of the council of Economic Advisers in the 1960s said that "I call it a Reagan - Volcker - carter recession .however the taming of inflation at that time, set the stage for robust growth period during Reagan's administration.
It is assumed that govt. has directly or indirectly influence over the presence or degree of recession .it is usually assumed by the economists that that some degree of the recession is unavoidable. Modern govts also take steps to soften the recession. They are sometimes unsuccessful, at least preventing recession and it is difficult to establish whether they make it severe or longer lasting. |
