Economic cycle

(redirected from Boom-Bust Cycles)

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 ?
Investor concerns on purchasing private sector stock have clearly abated especially with developers who survived both boom-bust cycles in Dubai.
However, it's not too early for them to start thinking about how to respond in a manner that might free us from the boom-bust cycles that we seem to be experiencing every 10 years.
The recommended policy rebalancing should be incorporated into a long-term framework with a stronger focus on preventing costly financial boom-bust cycles, the BIS says.
There seem to be two relevant strands: first, that boom-bust cycles destabilise the economy and lead to uncertainty in product development, research finding and the like; second, is whether the same phenomenon could be observed in the interpretation of scientific data, leading to unwitting bias in results?
And additional policies should be put in place to limit the repetition of boom-bust cycles.
Now, an analysis by the rating agency Standard & Poor's lends its weight to the argument: The widening gap between the wealthiest Americans and everyone else has made the economy more prone to boom-bust cycles and slowed the 5-year-old recovery from the recession.
Hence, in what follows I take it as a historical fact that there occurred two Austrian-type business cycles in the period under question, and therefore, my focus will be in indicating how M&A waves were a part of these boom-bust cycles.
Vole populations may not be declining, but boom-bust cycles are less pronounced, probably due to winter changes.
The essays discuss the relevance of balanced growth in the CESEE countries, the characteristics of a sustainable growth model in the region, and the impact of pronounced boom-bust cycles on the long-term income convergence process in Europe; changes in banking prior to the crisis; issues related to economic growth in Central and Eastern European countries following the crisis; and the design of the economic and monetary union.
We don't want to get into one of these boom-bust cycles with property that we've had in the past.
But here is the ultimate lesson: without a significant home-grown investor base, supported by futuristic policy initiatives and structural reforms, countries risk a return to the old boom-bust cycles of the 20th century.
They can promote financial stability by helping to build capital buffers and reduce incentives for speculative behaviour, which can contribute to boom-bust cycles in credit and asset prices," Mr Wheeler said.