What is the Difference Between Recession and Depression?
That depends on how you look at it. These two things go hand in hand and are in fact related. Let’s take a look at both of them and the definition between the two. Recession, in other words, simply means a market in decline. There are several negative things that can come from a recession, such as unemployment.
Depression is an unusually severe or unusually long recession. Since 1854, an average recession lasted 17 months with a standard deviation of 12. The Great Depression of 1929-33, in contrast, lasted 43 months (so it was a two standard deviation event); the Great Depression of 1873-79, 65 months (that one was a four standard deviation event).
As we posted on recession previously, a recession is generally described as a significant decline (Negative growth rate) in country’s GDP (Gross domestic product) for at least two quarters or longer. Generally a recession is preceded by several quarters of slowing down in economic activity. So what is depression? Depression is nothing but a recession, which lasts longer and its impact is deeper. If any downturn in the economy or GDP can be called as recession then more than 10 percent decline in GDP is called depression. If you look at the last century, we could observe many recessions but depressions are few. United States 1929 great depression was the largest and most important economic depression in modern history and is used in the 21st century as an example of how far the world’s economy can fall. The great depression which started on 29th October 1929 lasted till around 1939.
