W-Shaped Recovery (Economics) - Explained
What is a W Shaped Recover?
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What is a W-Shaped Recovery?
A W-shaped recovery is an economic chart that symbolises the period of recession and recovery in an economy. The W-shaped recovery is an approach in charting that reflects a double-dip recession in the economy. The W shape in the chart is symbolic, it is a representation of an economy that experiences an acute decline (recession) followed by a recovery, this recovery is however shrt-loved because a sharp decline (recession) occurs almost immediately after the recovery. This decline does not last forever, as the last stroke of the W represents a recovery which occurs for a long time. The middle point of the W-shaped chart symbolises a period of recovery that is strangulated by overwhelming economic crisis, this point gives an outlook of a bearish market.
How does a W-Shaped Recovery Work?
According to many analysts, the economic recession of 1981 was duly represented by the W-shaped recovery. In the economic chart factors that drive economic growth are put in consideration. That means that a countrys GDP, employment rate, labor, industrial output, productivity, among others are considered in the chart. Apart from a W-shaped recovery, there are other shapes that a recession and recovery chart could take, these include; U, L, V, and J shapes. Typically, a W-shaped recovery measures the growth of an economy, it reflects a period of hostile recession in an economy followed by a recovery that is overtaken by another sharp recession before a long-term recovery occurs. Hence, the W-shaped recovery sows two periods of recession and two periods of recovery.
W-Shaped Recovery vs. Other Shapes
A W-shaped recovery measures the health of an economy, it is a double-dip recession or recovery. There are many other economic shapes, such as V-shaped, U-shaped and L-shaped recessions. The movement of stocks in the market or overall market performance is measured and represented using a V-shaped economic recession. Recessions that are short-lived before a turnaround occurs in the market are represented using the V shape. The 1990 and 2001 recessions that took eight months before a recovery occurred are instances of V-shaped recessions. Recession and recovery trends on a U-shaped chart and L-shaped chart takes a different turn from those of W and V-shaped charts.
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