Asymmetric Shock

Posted in Finance, Accounting and Economics Terms, Total Reads: 1996

Definition: Asymmetric Shock

A sudden change in the economy or a sector of an economy which spurs different reactions in different parts of the country is typically termed as asymmetric shock. This is to say that even when the event that triggered the reaction is the same, the intensity of response with which it is greeted varies a great deal depending on how sensitive the economy is to the change. Other factors which might possibly contribute to the determination of response are legal differences, the political cycle, public purchasing, fiscal policies and the like. The more crucial it is, the more intense the reaction is. This concept gains significance in the sense that it is this asymmetry which makes it all the more difficult for the central government and policy makers to devise a policy which is beneficial to each and every member of the society.

For example, a mad monsoon leading to hike in prices of food grains is more like to hit small farmers adversely than a mobile dealer, though in a far-fetched sense both are likely to get affected by it. To make it clearer, a rise in oil prices is likely to hit airlines and manufacturing industry more severely than a retail vendor, through the both might feel the impact.

Hence, this concludes the definition of Asymmetric Shock along with its overview.

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