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

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 s...

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Bibliographic Details
Published in:Economies 2021-06, Vol.9 (2), p.1-19
Main Authors: Victor, Vijay, Karakunnel, Joshy Joseph, Loganathan, Swetha, Meyer, Daniel
Format: Article
Language:English
Subjects:
Consumption
Coronaviruses
COVID-19
Debt restructuring
Economic conditions
Economic growth
Economic models
EU membership
fiscal policy
Friedman, Milton
GDP
Government spending
Gross Domestic Product
Growth rate
Inflation
Interest rates
Monetary policy
Pandemics
Phillips curve
Price levels
Recessions
Tax rates
Unemployment
unemployment monetary policy
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Summary: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.
ISSN:2227-7099
2227-7099
DOI:10.3390/economies9020073