The actual meaning of Hard landing definition in terms of the Economy refers to the downturn or depression period in the economy following its growth period. This term is used for the economies that experience a sudden and unexpected downturn soon after the rapid growth. Now, the hard landing often results in the economy going into the inactive period. In some cases, a hard landing can lead to an economic Recession.
In other words, hard landing emphasizes the growth cycle of an economy that experiences a recession after a slow-growth period. It happens when the government tries to balance the Inflation. Slow Landing, on the other hand, is a term used to describe a phase when the government slows down the growth of the economy in order to control the rising prices. The economy slows down to a point where inflation is controlled, but it doesn’t experience a downturn or recession.
Usually, people expect a soft landing in which the changes in the policies, that were meant to manage the economic risks, do not result in unnecessary unemployment and inflation. The truth is an overheated economy is highly likely to have a hard landing. Take, the increased inflation by the Federal Reserve, for example.
They have increased interest rates multiple times in the past. Unfortunately, it didn’t end well. Market and customers couldn’t accept the hiked interest rate. The results were unpalatable. The economy went into the recession phase. Another example of a hard landing is the 2007 changes in the monetary policy concerning the real estate market. The outcome was terrible. Instead of a depression period, the economy ended up in a great recession. Many countries have experienced slow growth in the economy due to a hard landing.
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Hard landing has often been used for China that has experienced tremendous growth in its GDP over the past few decades. However, some observers and research analysts believe that this sudden growth in Gross Domestic Product has got the nation ready for a hard landing. The high debts as well as the high rates of real estate are considered to be the primary catalysts for a great recession.
Many people and experts feared a hard landing post the 2015 devaluation in the Chinese currency. In fact, the experts believed that the odds of China experiencing a hard landing were 30%. Surprisingly, Chinese investment markets and currency stabilized. Despite having gone through several events that made China extremely vulnerable to a hard landing, the nation has not yet experienced a recession due to a hard landing.
The United States faces hard landings due to the Federal Reserve tightening policy. Basically, the government aims to make changes to the monetary policy to control inflation. While it does control inflation, the economy ends up in recession in some cases.