As the new year approaches, there are fears of recession in many of the world’s top economies, including the United States, the biggest and most consequential of all. The US does look headed for a recession — a key pointer is the inversion of US treasury yields.
What is a recession, to begin with?
A recession typically involves the overall output in an economy contracting for at least two consecutive quarters, along with job losses and reduction in overall demand. The US National Bureau of Economic Research (NBER) decides whether the economy is in a recession based on its assessment of the depth, diffusion, and duration of the impact on the economy.
Sometimes, the duration may not be long but the decline could be very severe — as it happened in the wake of the Covid-19 pandemic. Or, the depth and diffusion may be relatively less but the downturn may last long — as is expected in the United Kingdom in the wake of the…
