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Aggressive and Unconventional Monetary Policy – Recessionary Trend in the Global Economy: Way Forward

The question of recession in advanced countries basically arises from the Aggressive and Unconventional Monetary Policy (AUMP) that was pursued by the U.S, U.K., and Euro area. In fact, if the analysis of the AUMP is done in an unbiased manner, then it is obvious that the recent swiftness by most advanced economies (AEs), especially the US, in raising interest rates was not justified. In because of the rise in interest rates in most AEs, the sacrifice ratio (SR) in these countries accounting for nearly half of global GDP, would not only reflect in the recessionary tendencies in major economies of the world but across the planet. The AEs can bear the brunt of SR, but the spill-overs that would happen in emerging economies (EMEs) would be very detrimental to their growth and global recovery. In a flattened world, where EMEs and AEs are significantly integrated not only through trade but also through capital flows as well as confidence channels, such initiatives and spread of recessionary fears can further perpetuate and even aggravate the slow-down.

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