If a prediction of a recession causes the market to crash, can it be said that the prediction itself is part of the cause of the recession? Like a self-fulfilling prophecy?

Question

If a prediction of a recession causes the market to crash, can it be said that the prediction itself is part of the cause of the recession? Like a self-fulfilling prophecy?

In: Economics

Answer 1

The technical definition of recession is 2 consecutive negative gdp quarters.

The market is basically how much people will be paying for expected earnings of companies and dividends.

The first affects the second, but only really becomes causal if people and businesses and governments actually stop spending money.

So if market actually scares people it can contribute to a recession; but there’s a lot of stuff that goes into the gdp calculation (consumer spending, business spending, investment, govt spending) so it probably wouldn’t ever be the primary factor if an economist would make a write up.