Great Recession

For background on financial market events beginning in 2007, see 2007–2008 financial crisis. For the 2020 recession, see COVID-19 recession.
Not to be confused with the Great Depression during the 1930s or the Great Resignation.

Great Recession
World map showing real GDP growth rates for 2009; countries in brown were in a recession.
DateDecember 2007 – June 2009 (c. 1 year; 7 months)
LocationWorldwide
TypeRecession
Cause(disputed)
OutcomeImpact differed geographically
Part of a series on the
Great Recession
Major aspects
Causes
Summit meetings
Government response and policy proposals
Business failures
Regions
Timeline

The Great Recession was a period of market decline in economies around the world that occurred from late 2007 to mid-2009.[1] The scale and timing of the recession varied from country to country (see map).[2][3] At the time, the International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression.

The causes of the Great Recession include a combination of vulnerabilities that developed in the financial system, along with a series of triggering events that began with the bursting of the United States housing bubble in 2005–2012.[4][5] When housing prices fell and homeowners began to abandon their mortgages, the value of mortgage-backed securities held by investment banks declined in 2007–2008, causing several to collapse or be bailed out in September 2008. This 2007–2008 phase was called the subprime mortgage crisis.

The combination of banks being unable to provide funds to businesses, and homeowners paying down debt rather than borrowing and spending, resulted in the Great Recession that began in the U.S. officially in December 2007 and lasted until June 2009, thus extending over 19 months.[6][7] As with most other recessions, it appears that no known formal theoretical or empirical model was able to accurately predict the advance of this recession, except for minor signals in the sudden rise of forecast probabilities, which were still well under 50%.[8]

The recession was not felt equally around the world; whereas most of the world's developed economies, particularly in North America, South America and Europe, fell into a severe, sustained recession, many more recently developing economies suffered far less impact, particularly China, India and Indonesia, whose economies grew substantially during this period. Similarly, Oceania suffered minimal impact, in part due to its proximity to Asian markets.

  1. ^ “US Business Cycle Expansions and Contractions”, United States NBER, or National Bureau of Economic Research, updated March 14, 2023. This government agency dates the Great Recession as starting in December 2007 and bottoming-out in June 2009.
  2. ^ "World Economic Situation and Prospects 2013". Development Policy and Analysis Division of the UN secretariat. Retrieved December 19, 2012.
  3. ^ United Nations (January 15, 2013). World Economic Situation and Prospects 2013 (trade paperback) (1st ed.). United Nations. p. 200. ISBN 978-9211091663. The global economy continues to struggle with post-crisis adjustments
  4. ^ The Investopedia Team. "The Great Recession Definition". Investopedia. Archived from the original on June 26, 2021. Retrieved July 12, 2021.
  5. ^ Singh, Manoj. "The 2007–2008 Financial Crisis in Review". Investopedia. Retrieved July 12, 2021.
  6. ^ Bernanke, Ben (September 2, 2010). "Causes of the Recent Financial and Economic Crisis". Retrieved February 15, 2021.
  7. ^ US Business Cycle Expansions and Contractions Archived September 25, 2008, at the Wayback Machine, NBER, accessed August 9, 2012.
  8. ^ Park, B.U., Simar, L. & Zelenyuk, V. (2020) "Forecasting of recessions via dynamic probit for time series: replication and extension of Kauppi and Saikkonen (2008)". Empirical Economics 58, 379–392. https://doi.org/10.1007/s00181-019-01708-2