What is an L-Shaped Recovery?
An L-shaped recovery refers to substantial losses in economic growth followed by a period of stagnation. Represented graphically, GDP data looks like the letter "L."
How Does an L-Shaped Recovery Work?
For example, suppose country ABC experiences a decline in gross domestic product (GDP) from $100 billion to $80 billion between 2002 and 2003. If country ABC's GDP remains at $80 billion until 2008, the country experienced an L-shaped recovery as shown below:
Why Does an L-Shaped Recovery Matter?
The most famous example of an L-shaped recovery is that experienced by the Japanese economy through the 1990s and beyond. Following an abrupt decline in productivity, Japan's economy was plagued by stagnant productivity for several consecutive years.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Not every scam is like the complicated set-up in The Sting. Con jobs can nickel and dime you over time, like the slow leak of management fees from a long-term...
Read More →
If you're like most investors, you probably use the price-to-earnings ratio (...
Read More →
One of Johnny Carson's greatest characters was Carnac the Magnificent. Clad in a cape and giant feathered turban, the comic great pretended to prophesy the answers to secret questions. The...
Read More →
Steve Jobs once famously commented that simplicity is genius. That attitude helped Apple Inc. (Nasdaq: AAPL) redefine the personal electronics space and create an entire...
Read More →
Each week, one of our investing experts answers a reader's question in our InvestingAnswers' Q&A column. It's all part of our...
Read More →
