Economic cycle

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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 Latvian economy is among the fastest-growing in the euro area, but continued reforms will promote a rapid and sustainable pace of convergence with upper-income countries while limiting the risk of repeated boom-and-bust cycles, according to the OECD Economic Survey of Latvia.
Building lasting businesses from the boom-and-bust cycles of the past is not easy.
Although the report said that plans to build major new power plants are "often speculative and typically operate on boom-and-bust cycles," experts at the Energy Department predict that up to half of the coal-fired utilities will eventually be built.
The Bodner family members have shepherded the company through what used to be a set of boom-and-bust cycles in Houston, all the while finding additional time to act in leadership roles in their state and in the scrap recycling industry.
Using the boom-and-bust cycles that have occurred in the American, Swedish, Thai, and Japanese markets for property, they find three contributing factors: a) imperfect information in the market, which causes investors to overestimate the present value of expected investments; b) perverse incentives, with investors trying to shift losses to the banks that they had borrowed from while attempting to avoid putting their own equity into properties; and c) psychological bias in putting too much emphasis on recent history in the real estate market combined with insufficient attention to long-term trends.
From its inception as a music hall, supporting the type of burlesque entertainment treasured by the Irish and English working classes, to its subsequent refurbishment as a grand cinema, the Coronet's history is inscribed as a recurring series of boom-and-bust cycles.
More than a few [of those he interviewed] were troubled by what they viewed as its [capitalism's] essential heartlessness; they cited our boom-and-bust cycles, recurrent unemployment, the stubborn survival of poverty in the midst of plenty, and the astronomical cost of medical care.
Now publicly traded, InsWeb weathered the challenges of online boom-and-bust cycles.
The Elk Valley in southeast British Columbia is dependent on coal mining, a single industry that often brings boom-and-bust cycles to residents.
In 1982 the US Food and Drug Administration (FDA) approved the first biotech drug, human insulin, which was produced in genetically modified bacteria; since Genentech went public back in 1980 the biotech sector has been marked by periodic boom-and-bust cycles in the stock market.
The USFS was created to sustainably manage the forests, but boom-and-bust cycles are still devastating western towns.
Polling people in the Colorado tech industry to find out what they have learned from our most recent boom-and-bust cycle, I've gotten responses ranging from philosophy to humor.