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L-Shaped Recovery

What is 'L-Shaped Recovery'

A type of economic recession and recovery that resembles an "L" shape in charting. An L-shaped recovery represents the shape of the chart of certain economic measures, such as employment, GDP and industrial output. An L-shaped recovery involves a sharp decline in these metrics followed by a long period of flat or stagnant growth.

Explaining 'L-Shaped Recovery'

Many refer to the 1990s-era in Japan as a classic example of an L-shaped recession, where there was an economy that essentially flatlined for a decade. There are countless other shapes a recession and recovery chart can take, including V-shaped, W-shaped, U-shaped and J-shaped. Each shape represents the general shape of the chart of the economic metrics that gauge the health of the economy.


Further Reading


FDI, economic decline and recovery: Lessons from the Asian financial crisis
www.emerald.com [PDF]
… The worst downside scenario could be for the US economy being trapped in a Japan like “L” shaped recovery for the … It is unlikely that exports will recover within this year … services, still account for only about percent of the Indian GDP, their multiplier effect for economic activity is …

On economic theory and recovery of the financial crisisOn economic theory and recovery of the financial crisis
onlinelibrary.wiley.com [PDF]
… The worst downside scenario could be for the US economy being trapped in a Japan like “L” shaped recovery for the … It is unlikely that exports will recover within this year … services, still account for only about percent of the Indian GDP, their multiplier effect for economic activity is …

China's tourism in a global financial crisis: a computable general equilibrium approachChina's tourism in a global financial crisis: a computable general equilibrium approach
www.tandfonline.com [PDF]
… The worst downside scenario could be for the US economy being trapped in a Japan like “L” shaped recovery for the … It is unlikely that exports will recover within this year … services, still account for only about percent of the Indian GDP, their multiplier effect for economic activity is …

Worldwide economic recoveries from financial crises through the decadesWorldwide economic recoveries from financial crises through the decades
www.sciencedirect.com [PDF]
… The worst downside scenario could be for the US economy being trapped in a Japan like “L” shaped recovery for the … It is unlikely that exports will recover within this year … services, still account for only about percent of the Indian GDP, their multiplier effect for economic activity is …

British politics and the financial crisisBritish politics and the financial crisis
link.springer.com [PDF]
… The worst downside scenario could be for the US economy being trapped in a Japan like “L” shaped recovery for the … It is unlikely that exports will recover within this year … services, still account for only about percent of the Indian GDP, their multiplier effect for economic activity is …

Three complications in Asian economic recoveryThree complications in Asian economic recovery
onlinelibrary.wiley.com [PDF]
… The worst downside scenario could be for the US economy being trapped in a Japan like “L” shaped recovery for the … It is unlikely that exports will recover within this year … services, still account for only about percent of the Indian GDP, their multiplier effect for economic activity is …

Business leaders resigned to turbulent economic futureBusiness leaders resigned to turbulent economic future
go.gale.com [PDF]
… The worst downside scenario could be for the US economy being trapped in a Japan like “L” shaped recovery for the … It is unlikely that exports will recover within this year … services, still account for only about percent of the Indian GDP, their multiplier effect for economic activity is …



Q&A About L-Shaped Recovery


When does an economic recovery typically begin following a recession?

Typically, an economic recovery begins about six months after the end of a recession; however, it may take several years for all sectors within an economy to fully recover from its effects.

What does it mean to say that an economy goes through a process of adaptation and change during the recovery period?

During this time, the economy adapts to new circumstances and changes in policies and regulations enacted by governments and central banks.

What does it mean for a recession and recovery to be shaped like an "L"?

The economy experiences a sharp decline followed by long period of flat or stagnant growth.

What is an economic recovery?

An economic recovery is the phase of the business cycle following a recession.

How do you determine if a recession and recovery are shaped like an "L"?

You can determine this by looking at charts that depict economic metrics such as employment, GDP, industrial output.

What is an L-shaped recovery?

An L-shaped recovery is a type of economic recession and recovery that resembles an "L" shape in charting.

How do resources become re-employed in new industries during this period?

Resources become re-employed in new industries when businesses fail after a recession.

What are some terms used to describe periods of growth after recessions?

Terms such as "recovery", "reconstruction", and "rebuilding" might suggest a return to the status quo before conflict, but typically there is not a return to pre-conflict conditions.

How do displaced workers find new employment during this period?

Displaced workers find new employment when failing enterprises are bought up or broken up by others.

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