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A global recession is an economic downturn experienced worldwide due to interdependent economies. The IMF defines it as global growth of less than 3%. Globalization can cause local recessions to spread globally, as seen in the late 2000s recession.
A global recession is an economic recession experienced on a global scale. This can happen more easily in modern times, because the economies of most countries are interdependent. According to the International Monetary Fund (IMF), total world economic growth of less than 3% constitutes a global recession. Due to globalization, domestic economic downturns can spread to other countries. For example, the recession of the late 2000s started in the United States and spread to many other industrialized countries.
The International Monetary Fund was created after World War II to oversee global economic cooperation and provide loans to countries in financial difficulty. It still plays a leading role in global economic affairs. It’s difficult to define an economic recession, but the IMF has used a specific definition for years: a global recession means global growth of less than 3%. Global economic growth can be measured simply by aggregating the gross domestic products of all countries.
The reason why a positive growth rate would be worrisome is twofold. First of all, positive absolute growth can mean negative per capita growth if the population is increasing enough. Second, it is rare for emerging market economies – like those of many poor countries – to show low growth statistics. Therefore, the positive growth of these developing economies can overshadow the negative growth of the more industrialized economies.
A global recession is more likely to occur in the modern world than in the past. There is now a “global” economy in which national borders generally do not significantly affect trade. The American economist Thomas Friedman defined globalization as the integration of finance, markets, nation-states and technologies within a free market system. It is this globalization that can bring about local recessions on a global scale.
For this reason, a global recession will typically not arise from many independent causes. Instead, their origins are often attributed to a specific time and place in the world. This is the case of the recession of the late 2000s.
In 2007, there was a crisis in the US banking system that threatened to cause the collapse of many large financial institutions. The US government responded by bailing out banks with low-interest loans and taking other measures. This was quickly followed by similar crises and responses around the world. Another result was a drop in global stock prices and a general economic slowdown. Due to its global scale, the recession of the late 2000s is often considered the worst economic crisis since the Great Depression.
Asset Smart.
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