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 ?
Despite an unsettled political environment, the authorities are moving ahead with ambitious structural reforms that will help sustain growth over the medium term, promote competitiveness and diversification, and mitigate the boom-bust cycle.
Ateneo de Manila University EagleWatch senior research fellow Alvin Ang said the Philippines has already escape the boom-bust cycle of economic growth as early as 2000.
This heightens the risk that when the bubbles burst, we'll be forced to rely yet again on artificially low interest rates, which will set us up yet again for another boom-bust cycle.
In the United States, according to a white paper published by the Ohio State University, during the last boom-bust cycle, there was indeed an intertwined relationship between both the amount and type of media coverage and public perceptions regarding the housing market.
Coal families in rural areas have significant experience with the boom-bust cycle," said lead author Michael Betz.
The Naval Shipbuilding Plan will end the boom-bust cycle that has afflicted the industry for many years, providing certainty for local businesses and shipbuilding workers.
Efforts to tame the boom-bust cycle through the control of prices and production have repeatedly broken down.
The historical trend of NPLs among Kenyan banks is a case in point of this boom-bust cycle.
Glenn Stevens, governor of the Reserve Bank of Australia, said that a boom-bust cycle in house prices would not augur well for the economy.
Many consumers tend to become more dependent on debt to continue spending, thereby worsening the boom-bust cycle.
However, the International Monetary Fund has repeatedly warned Dubai of another possible boom-bust cycle and called for tighter measures to counter property speculation.
The UAE emirate of Dubai is still recovering from its 2009 debt crisis and the International Monetary Fund (IMF) has warned a slew of new real estate projects could lead to another boom-bust cycle.