Wednesday, November 18, 2020

What the hell is a K-shaped recovery anyway?

You may have read about the possibility of a K-shaped recovery from the economic woes brought on by the pandemic, and wondered what the hell they were talking about. Ex-Bank of Canada head Stephen Poloz was predicting it just recently for Canada, for example. 

A V-shaped recovery or a U-shaped recovery are pretty easy to visualize: economic activity goes down and then it goes up again, more or less quickly. But K-shaped?

Well, you might not be able to visualize it because it is not a very good visual image. The idea of a K-shaped recovery is that some sectors of the economy take off again, while others continue to languish. I guess they needed a letter that would give the impression of two different economies concurrently going off on different and diverging trajectories, and someone was probably very pleased with themselves for coming up with the letter K.

But, while the right hand side does go off in different directions, the left hand side is a vertical line, and does not indicate at all the downhill trajectory of the economy before the recovery. 

Having said that, I'm not sure that I can suggest a better option - a Y on its side, perhaps.

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