From a recession to the COVID-19 pandemic: Inflation-unemployment comparison between the UK and India

Vijay Victor, Joshy Joseph Karakunnel, Swetha Loganathan, Daniel Francois Meyer

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

The recession in India and the UK peaked in 2017 due to the implications of new policy initiatives. The outbreak of the COVID-19 pandemic at the beginning of 2020 intensified the crisis, causing a drastic decline in aggregate demand and output. India and the UK have resorted to monetary and fiscal stimulus packages to face the economic crisis. This study investigated the inflation-unemployment dynamics during the recession and COVID-19 times in India and the UK. Using a generalized additive model (GAM), the results of this study revealed that the recession had given way to stagflation in India. In contrast, in the UK, it has led to a more severe recession in the short-run. During the downturn, policy initiatives aggravate the recession and eventually turn to stagflation in India due to inflation caused by the weak supply side. However, in the UK, the policy initiatives during this downturn pushed the economy into a deeper recession due to reduced demand. The outbreak of the COVID-19 pandemic has had a similar recessionary impact on both economies. A time horizon based recovery plan is suggested to help the economies recover from stagflation and even deeper recession. This framework could enable policymakers to choose the right path of recovery within the shortest possible time.

Original languageEnglish
Article number73
JournalEconomies
Volume9
Issue number2
DOIs
Publication statusPublished - Jun 2021
Externally publishedYes

Keywords

  • COVID-19
  • Fiscal policy
  • Inflation
  • Unemployment monetary policy

ASJC Scopus subject areas

  • Development
  • Economics, Econometrics and Finance (miscellaneous)

Fingerprint

Dive into the research topics of 'From a recession to the COVID-19 pandemic: Inflation-unemployment comparison between the UK and India'. Together they form a unique fingerprint.

Cite this