W-Shaped Recovery – Definition

Cite this article as:"W-Shaped Recovery – Definition," in The Business Professor, updated July 29, 2019, last accessed October 20, 2020, https://thebusinessprofessor.com/lesson/w-shaped-recovery-definition/.

Back toECONOMIC ANALYSIS & MONETARY POLICY

W-Shaped Recovery Definition

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.

A Little More on What is a W-Shaped Recovery

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 country’s 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.

References for “W-Shaped Recovery

Academic research for “W-Shaped Recovery

Supply chain opportunity in an uncertain economic recovery, Olson, E. G. (2010). Supply chain opportunity in an uncertain economic recovery. Supply Chain Management: An International Journal, 15(6), 488-492.

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). München: ifo Institut für Wirtschaftsforschung an der Universität München.

Vacationers and the economic “double dip” in Europe, Bronner, F., & de Hoog, R. (2014). Vacationers and the economic “double dip” in Europe. Tourism management, 40, 330-337.

Financial restructuring in East Asia: halfway there?, Claessens, S., Djankov, S., & Klingebiel, D. (2001). Financial restructuring in East Asia: halfway there?. Resolution of Financial Distress: An International Perspective on the Design of Bankruptcy Laws, 2001, 229-259.

South Korea’s economic policy response to the global financial crisis, Pascha, W. (2010). South Korea’s economic policy response to the global financial crisis. Korea, 135-164.

Was this article helpful?