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The great recession of 2008-2009 : causes, consequences and policy responses

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  • Verick, Sher
  • Islam, Iyanatul

Abstract

Starting in mid-2007, the global financial crisis quickly metamorphosed from the bursting of the housing bubble in the US to the worst recession the world has witnessed for over six decades. Through an in-depth review of the crisis in terms of the causes, consequences and policy responses, this paper identifies four key messages. Firstly, contrary to widely-held perceptions during the boom years before the crisis, the paper underscores that the global economy was by no means as stable as suggested, while at the same time the majority of the world’s poor had benefited insufficiently from stronger economic growth. Secondly, there were complex and interlinked factors behind the emergence of the crisis in 2007, namely loose monetary policy, global imbalances, misperception of risk and lax financial regulation. Thirdly, beyond the aggregate picture of economic collapse and rising unemployment, this paper stresses that the impact of the crisis is rather diverse, reflecting differences in initial conditions, transmission channels and vulnerabilities of economies, along with the role of government policy in mitigating the downturn. Fourthly, while the recovery phase has commenced, a number of risks remain that could derail improvements in economies and hinder efforts to ensure that the recovery is accompanied by job creation. These risks pertain in particular to the challenges of dealing with public debt and continuing global imbalances.

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Bibliographic Info

Paper provided by International Labour Organization in its series ILO Working Papers with number 457693.

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Length: 54 pages
Date of creation: 2010
Date of revision:
Publication status: Published in Employment working paper series
Handle: RePEc:ilo:ilowps:457693

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Keywords: economic recession; financial market; economic recovery; economic policy; labour market; employment; labour policy; developed countries; developing countries; récession économique; marché financier; reprise économique; politique économique; marché du travail; emploi; politique du travail; pays développés; pays en développement; recesión económica; mercado financiero; recuperación económica; política económica; mercado de trabajo; empleo; política laboral; países desarrollados; países en desarrollo;

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  1. Lechner, Michael & Wunsch, Conny, 2007. "Are training programs more effective when unemployment is high?," IAB Discussion Paper 200707, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Ajit Zacharias & Thomas Masterson & Kijong Kim, 2009. "Who Gains from President Obama's Stimulus Package ... And How Much?," Economics Policy Note Archive sr_06-12-09, Levy Economics Institute.
  3. Verick, Sher, 2009. "Who Is Hit Hardest during a Financial Crisis? The Vulnerability of Young Men and Women to Unemployment in an Economic Downturn," IZA Discussion Papers 4359, Institute for the Study of Labor (IZA).
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  12. Bezemer, Dirk, 2009. "No one saw this coming. Understanding financial crisis through accounting models," Research Report 09002, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  13. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2010. "The future of public debt: prospects and implications," BIS Working Papers 300, Bank for International Settlements.
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  20. Sheng,Andrew, 2009. "From Asian to Global Financial Crisis," Cambridge Books, Cambridge University Press, number 9780521118644, October.
  21. repec:idb:brikps:29338 is not listed on IDEAS
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