Causes of the Economic Recession Essay Example | Topics and Well Written Essays - 2500 words

Causes of the Economic Recession - Essay Example Economic Recession has adverse effects on the economies and they include such aspects as unemployment which can hurt the economy of a country. Economic recession is also responsible for the lower standard of living for various people around the world (Siegel, 2002). There are various causes of an economic recession in a country's economic or rather in the world economy. This can be attributed to various effects which may vary from one country or region to another. There have been identified a number of causes for economic recession and this include financial crisis, energy crisis, war, under consumption, over production, currency crisis and increased fuel prices (Bulow, 1985). This is a situation in which various financial institutions or financial assets loose their value greatly and at a very sudden way. The situation can be expressed under many circumstances and it has been documented in historical perspective. One of the major causes of financial crisis in from the 19th century to the modern day world is the aspect of banking panics which have been associated with many recessions in the world. Financial crisis is also characterized by the crashing of stock markets all over the world, sovereign defaults, currency crisis and the financial bubbles bursting (Markus, 2008). There have been recorded a number of financial crisis in the world and the most notable is the Asian Financial Crisis of the year 1997 which was responsible for economic recession in Asia and the far reaching effects were felt all over the world. The most notable of the financial crisis was the Global Financial Crisis of 2008 and 2009 which sparked off in the United States of America and spread to major European economies and consequently its effects were felt all over the world with the third world countries being adversely affected (Charles, 2005). Prior to the economic recession of 2008 and 2009 various financial institution collapsed and this led to the closure of many corporations in the world. The majority of these corporations were in the world leading economies notably the countries of United States such as American Insurance Group and corporations from Europe. These countries are the leading world economies and with this economies being affected by financial crisis, the world consequently was affected by economic recession (Siegel, 2002). 1.1.2 Currency Crisis A currency crisis is also referred to as a balance of payment crisis and it happens when the currency of a country either appreciates or depreciates suddenly. This change of the value of a currency undermines its qualification as a medium of exchange or also as a store of value. It is a character of a financial crisis and it is incorporated into one of the association of the real economic