Economic cycle

(redirected from Boom Bust Cycle)

Economic Cycle

The period of time during which an economy evolves from a state of health to fragility to recession to recovery and back to health. Every capitalist economy has cycles to a greater or lesser extent. However, regulations may be designed to curtail them (or, more accurately, to attempt to maximize the good times while preventing the bad times); this is rarely successful. Factors affecting economic cycles include the level of inflation, the availability of capital, natural disasters, and political events. Some industries are considered countercyclical, meaning that demand for their products remains relatively constant regardless of economic circumstances; some even do better in recessions. Other industries, mainly those considered luxuries, are greatly dependent on economic cycles. An economic cycle is often colloquially called a boom-and-bust cycle.

Economic cycle.

An economic cycle is a period during which a country's economy moves from strength to weakness and back to strength.

This pattern repeats itself regularly, though not on a fixed schedule. The length of the cycle isn't predictable either and may be measured in months or in years.

The cycle is driven by many forces -- including inflation, the money supply, domestic and international politics, and natural events.

In developed countries, the central bank uses its power to influence interest rates and the money supply to prevent dramatic peaks and deep troughs, smoothing the cycle's highs and lows.

This up and down pattern influences all aspects of economic life, including the financial markets. Certain investments or categories of investment that thrive in one phase of the cycle may lose value in another. As a result, in evaluating an investment, you may want to look at how it has fared through a full economic cycle.

References in periodicals archive ?
The Government will need to ensure that the new mortgage caps are fully enforced if it is to prevent the repeat of another 2003-2008 boom bust cycle.
Mr Sercombe said: "The boom bust cycle of sheep pricing is not in the interests of the farmer, processor or retailer.
Summary: Kingdom avoids boom bust cycle of some Gulf markets - Cityscape Intelligence launches first Saudi residential and commercial price index in eighteen districts
While policies and programs that promote exports and encourage dumping should be prohibited, countries should be allowed to pursue a diversity of supply-management and other programs to minimize dramatic price swings and mitigate the boom bust cycle in commodities markets.
The degree of depressions and recessions and the boom bust cycle can be avoided with a sustainable, stable monetary policy
We need increased interest rates, a 30% drop in house prices, a land value tax and an end to the boom bust cycle in the housing market.