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 ?
Previous boom-bust cycles in Chinese stocks have also shown little or no connection to [apparent] economic performance, said Miller, whose firm provides anecdotal survey information about China based on the FedA's Beige Book model.
In parallel, in the fourth line of research new policy evaluation tools are developed, with a focus on robust tools aimed at containing financial contagion and boom-bust cycles, maintaining fiscal sustainability and coordinating monetary, fiscal and regulatory policies in normal and crisis regimes.
Unlike past boom-bust cycles, the current slide in oil prices is mainly attributable to the growing imbalance between supply and demand.
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.
In the worst case, the boom-bust cycles can generate a sudden reversal of capital flows and eventually financial crises.
It creates much deeper financial markets, which can absorb foreign investment flows, thus making boom-bust cycles much less likely.
This provokes boom-bust cycles, where spending is high in good years followed by deep cuts in bad years.