Global Recession


DEFINITION of 'Global Recession'

An extended period of economic decline around the world. The International Monetary Fund (IMF) uses a broad set of criteria to identify global recessions, including a decrease in per-capita gross domestic product worldwide. According to the IMF’s definition, this drop in global output must coincide with a weakening of other macroeconomic indicators, such as trade, capital flows and employment.

BREAKING DOWN 'Global Recession'

It’s important to note that, in order to classify as a recession, macroeconomic indicators have to wane for a significant period of time. In the United States, it’s generally accepted that GDP has to drop for two consecutive quarters for a true recession to take place. However, the IMF does not specify a minimum length of time when examining global recessions.

While there’s no official definition of a global recession, the criteria established by the IMF carries significant weight because of the organization’s stature across the globe. In contrast to some definitions of a recession, the IMF looks at more than a decline in gross domestic product (GDP). There must also be a deterioration of other economic factors, ranging from oil consumption to employment rates.

Ideally, economists would be able to simply add the GDP figures for each country to arrive at a “global GDP.” The vast number of currencies used throughout the world makes the process considerably more difficult. Though some organizations use exchange rates to calculate aggregate output, the IMF prefers to use purchasing power parity – that is, the amount of goods or services that one unit of currency can buy – in its analysis.

According to the IMF, there have been four global recessions since World War II, beginning in 1975, 1982, 1991 and 2009, respectively. This last recession was the deepest and widest of them all. Since 2010, the world economy has been in a process of recovery, albeit a slow one.

  1. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  2. International Monetary Fund - IMF

    An international organization created for the purpose of standardizing ...
  3. Problem Loan Ratio

    A ratio in the banking industry that denotes the percentage of ...
  4. Green Shoots

    A term used to describe signs of economic recovery or positive ...
  5. Recession

    A significant decline in activity across the economy, lasting ...
  6. Double-Dip Recession

    When gross domestic product (GDP) growth slides back to negative ...
Related Articles
  1. Personal Finance

    Examining Credit Crunches Around The World

    Market tops and bottoms have proliferated the financial markets throughout history. Learn how countries dealt with these tough economic periods.
  2. Trading Strategies

    5 Lessons From The Recession

    The bear market of 2008 was a game-changer for many investors. Find out what lessons you can take away from it.
  3. Insurance

    What Is The World Bank?

    You've heard of the World Bank, now find out how it functions and why some groups oppose it.
  4. Personal Finance

    How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.
  5. Forex Education

    Global Trade And The Currency Market

    Learn how the Bretton Woods system got the ball rolling for world trade.
  6. Fundamental Analysis

    An Introduction To The International Monetary Fund (IMF)

    Chances are you've heard of the IMF. But what does it do, and why is it so controversial?
  7. Active Trading Fundamentals

    Recession: What Does It Mean To Investors?

    Understanding the business cycle and your own investment style can help you cope with an economic decline.
  8. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  9. Personal Finance

    What Is The Bank For International Settlements?

    Get the scoop on the structure and functions of the oldest global financial institution.
  10. Investing Basics

    Why Interest Rates Affect Everyone

    Learn why interest rates are one of the most important economic variables and how every individual and business is affected by rate changes.
  1. To what extent has global competition affected the profitability of U.S. car manufacturers?

    Global competition resulted in less market share for U.S. car manufacturers and threatened company profits as more foreign ... Read Full Answer >>
  2. Why did oil prices drop so much in 2014?

    Oil prices have been one of the most watched trends in economics during the 21st century. From 2000 to 2008, the price of ... Read Full Answer >>
  3. Is Israel a developed country?

    Israel is considered a developed country, although it has substantial poverty and large income gaps. The International Monetary ... Read Full Answer >>
  4. Is Spain a developed country?

    Spain is a developed country. Nearly all organizations that analyze development status classify it as such. Spain has a strong ... Read Full Answer >>
  5. Is Malaysia a developed country?

    Despite undergoing rapid economic development over the past five decades, Malaysia is not considered a developed country, ... Read Full Answer >>
  6. Is Chile a developed country?

    As of 2015, Chile is the only country in Latin America that is generally recognized as a developed country. In 2010, the ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center