Chadha and Nolan (2002) explored the long run of the UK business cycle and presented some stylised facts on duration and the cyclical behaviour of macroeconomic aggregates.The National Institute estimates a daily series of premia in sovereign bond yields for the Advanced EMU, UK and US economies.A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression, although some argue that their causes and cures can be different. In the US, V-shaped, or short-and-sharp contractions followed by rapid and sustained recovery, occurred in 19–91; U-shaped (prolonged slump) in 1974–75, and W-shaped, or double-dip recessions in 19–82.Japan’s 1993–94 recession was U-shaped and its 8-out-of-9 quarters of contraction in 1997–99 can be described as L-shaped.And since then there has been an intense quarterly effort from economists running models, assessing data, understanding deviations of outcomes from expectations and applying judgement.
Policy responses are often designed to drive the economy back towards this ideal state of balance.Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession.The term animal spirits has been used to describe the psychological factors underlying economic activity. Shiller wrote that the term "...refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith.Macroeconomic indicators such as GDP (gross domestic product), investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise.
In the United Kingdom, it is defined as a negative economic growth for two consecutive quarters.
Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).