A global recession is a sustained period of economic contraction in which GDP growth turns negative and unemployment rates rise significantly. It can also be defined as a decline in investment and consumption in most countries in the world. The IMF defines a global recession as a contraction in the economy for two consecutive quarters, and a deterioration of other key factors such as industrial production, oil consumption, unemployment, and per-capita income.
A recession can be caused by many things, including financial crises, supply disruptions, and a lack of consumer demand. For example, the 1973 oil crisis was triggered by an embargo on US oil exports by OPEC which sent prices skyrocketing. This led to stagflation, a combination of stagnating or falling real GDP growth and rising inflation and unemployment. In the recent financial crisis that began in late 2007 and peaked in early 2009, most countries suffered from bank-system crises and sovereign debt crises. The economic stasis and social suffering resulting from these conditions were felt in different ways across the globe, with some nations experiencing political unrest over issues as minor as a bus-fare increase in Brazil or high rents in Tel Aviv.
When a global recession does occur, it tends to be very damaging to the economies of all major developed and emerging markets alike, even though they have little or no trade and investment ties with each other. A significant reason for this is that the most important factor in determining global interest rates is the market rate of interest, which reflects the time preferences of consumers, savers and investors for present versus future consumption. For this reason, global synchronized recession episodes have usually coincided with US recessions in the past four decades.