V Shaped Recovery - Explained
What is a V-Shaped Recovery?
Written by Jason Gordon
Updated at July 1st, 2021
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Table of Contents
What is a V-Shaped Recovery?How does a V-Shaped Recovery Work? V-Shaped Recovery Compared to an L-Shaped RecoveryAcademic Research on V-Shaped RecoveriesWhat is a V-Shaped Recovery?
A V-shaped recovery is a term that describes a period of economic decline (recession) and recovery that resembles a V shape. This V shape symbolizes a short trough or decline in an economy, followed by rapid recovery, the first stroke of the V shape shows a sharp but short decline while the other stroke indicates a rapid recovery. There are different shapes used by economists to describe different types of recessions and recoveries in an economy such as L-shaped, W-shaped, U-shaped, and J-shaped recovery. In the case of a V-shaped recovery, an economy suffers a sharp decline for a short period and then a sharp rise to its previous status.
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How does a V-Shaped Recovery Work?
Different types of economic recovery exist and each recovery is a measure of how healthy an economy is. The V-shaped recovery is otherwise called the V-shaped recession. It is an economic chart that depicts a drastic decline in an economy leading to a short period of recession which is later overthrown by a sharp economic recovery. Economists developed the V-shaped recovery chart and other charts after evaluating the overall health of an economy considering growth signals such as industrial output, gross domestic product, employment level, and other factors. In the United States, the 1953 recession is an instance of a V-shaped recovery in which the economy recovered from recession through the activities of consumers such as demand and spending.
V-Shaped Recovery Compared to an L-Shaped Recovery
V-Shaped recovery is characterized by a sudden economic decline followed by rapid economic growth. The case is different with L-shaped which is characterized by a sharp economic decline then a slow pace of recovery in an economy. There are many factors that contribute to a decline (recession) in an economy which includes monetary policies. The L-Shaped Recovery or recession is often described as the most dramatic recession given that there is slow economic growth or recovery after a steep recessionary period. Generally, countries of the world experience recessions and recoveries at different points and the duration with which the recession lasts before a recovery takes place determines the shape of the recovery.
Academic Research on V-Shaped Recoveries
- Recovery from a currency crisis: some stylized facts, Hong, K., & Tornell, A. (2005). Recovery from a currency crisis: some stylized facts. Journal of Development Economics, 76(1), 71-96.
- Output recovery after financial crises: An empirical study, Wan, C., & Jin, Y. (2014). Output recovery after financial crises: An empirical study. Emerging Markets Finance and Trade, 50(6), 209-228.
- On economic theory and recovery of the financial crisis, Yao, S., & Zhang, J. (2011). On economic theory and recovery of the financial crisis. The World Economy, 34(5), 764-777.
- Output recovery after currency crises, Teimouri, S., & Brooks, T. J. (2015). Output recovery after currency crises. Comparative Economic Studies, 57(1), 75-102.
- The global financial crisis: comparisons with the Great Depression and scenarios for recovery, Brahmbhatt, M., & Da Silva, L. P. (2009). The global financial crisis: comparisons with the Great Depression and scenarios for recovery.[PDF]
- Fallacies about the global financial crisis harms recovery in the poorest countries, Naude, W. (2009). Fallacies about the global financial crisis harms recovery in the poorest countries. In CESifo Forum(Vol. 10, No. 4, pp. 3-12). Mnchen: ifo Institut fr Wirtschaftsforschung an der Universitt Mnchen.[PDF]
- Global economic prospects as of September 30, 2010: A moderating pace of global recovery, Mussa, M. (2010, September). Global economic prospects as of September 30, 2010: A moderating pace of global recovery. In Paper presented at the eighteenth semiannual meeting on Global Economic Prospects.
- Degrowth or regrowth?, Whitehead, M. (2013). Degrowth or regrowth?. Environmental Values, 22(2), 141-146.[PDF]
- Measuring global value chains and regional economic integration: an international input-output approach, Meng, B., Fang, Y., & Yamano, N. (2012). Measuring global value chains and regional economic integration: an international input-output approach.
- Automated noninvasive measurement of cyclophosphamide-induced changes in murine voiding frequency and volume, Wood, R., EICHEL, L., MESSING, E. M., & SCHWARZ, E. (2001). Automated noninvasive measurement of cyclophosphamide-induced changes in murine voiding frequency and volume. The Journal of urology, 165(2), 653-659.