Eye On The Markets

Economist Expects A "V-shaped" Recession as a Result of Coronavirus

Still, ripple effects will be felt worldwide

Dr. Tenpao Lee, an economist at Niagara University in upstate New York believes the recession that will come as a result of the Coronavirus pandemic will be V-shaped. Dr. Lee wrote the following: We are not in an “L” shaped recession (one that begins with intensity and severity and takes a long time to recover) since most people are trying to improve the economic system, what economists call “the invisible hand.”

We are not in a “U” shaped recession due to the advanced information technologies that will enable us to be reconnected quickly. A U-shaped recession occurs when certain metrics, such as employment, GDP and industrial input decline gradually decline and then gradually rise back over time, typically over a period of 12 to 24 months.

We are not in a “W” shaped recession (a double-recession) unless another non-economic (exogenous) factor, such as Coronavirus, comes from nowhere.

We are in a “deep V” shaped recession

The Coronavirus will have a deep and profound effect on the global economy. With all countries interconnected, the economic ripple effects will be felt around the world.

Specifically, the global supply network has been broken, and a significant portion of the global economy is halting. Therefore, a global recession, affecting both developed and developing countries, is inevitable in the first two quarters of 2020. Moreover, with advanced information technologies, this recession will be a “deep V” shaped recession, “i.e. the economy will decline and recover significantly and quickly.

this recession will be a "deep V" shaped recession, "i.e. the economy will decline and recover significantly and quickly...

Given the current pandemic condition, it is very likely that we are still at the first leg of the deep V recession in a downward stage.

First quarter financial reports, due in early April, will be a good indicator to show how deep the bottom of the “V” will reach. And, when the virus is generally contained in two months or so, we will witness the second wave of the global economy shaped by Coronavirus.

 

 

 

Dr. Lee is a full professor of economics at Niagara University. He earned his Ph.D. in economics from Iowa State University. He was a Fulbright Scholar to Taiwan in 2001 and a Fulbright Senior Specialist from 2002 to 2009.
In 2013, Dr. Lee was named as a Distinguished Visiting Research Fellow by Jianghan University in Wuhan, China. In 2015, he was awarded the title of “Shanghai Distinguished Oversea Professor” by the Shanghai City Government, China.
In addition to business statistics, Dr. Lee has taught supply chain management at both the undergraduate and graduate levels. He also developed a study abroad program to Asia that includes China, Taiwan and Japan.
Dr. Lee’s research has focused on the impact of globalization on the economy. He was the editor of the International Journal of Intellectual Property Management.
Currently, he is developing joint programs with Chinese universities.

 

Niagara University
Founded by the Vincentian community in 1856, Niagara University is a comprehensive institution, blending the best of a liberal arts and professional education, grounded in our values-based Catholic tradition. Its colleges of Arts and Sciences, Business Administration, Education, and Hospitality and Tourism Management offer programs at the baccalaureate, master’s and doctoral level.