Economic cycle

(redirected from Boom-and-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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
The IMF is pushing Pakistan to embrace a more flexible rupee policy to end repeated boom-and-bust cycles, with many analysts arguing that the local currency is overvalued, Geo News reported.
The country's dependence on election spending to boost economic growth has given rise to the so-called boom-and-bust cycles. Boom growth occurs during election years, while bust growth occurs in nonelection years.
"It's really important for us to understand what controls these boom-and-bust cycles, and how they might change in the future so we can better evaluate the implications on all other parts of the food web," Michael Behrenfeld, a marine plankton expert at Oregon State University in Corvallis, said in a ( statement.
Assabgui and Fuller presented on the boom-and-bust cycles of mining alongside fellow industry leaders, at the sixth annual Mining Day at Laurentian University in Sudbury.
The Wall Street financial firms embraced lowly shipping companies, thinking they could catch the rebound in an industry with some of the largest boom-and-bust cycles.
However, unlike the UAE, we have been through a number of dramatic property boom-and-bust cycles, causing stress effects in all those involved, from the highest to the humblest.
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.
Haviland Wright, chairman and CEO of Displaytech, a Longmont-based company that makes microdisplays, is more philosophical: "Boom-and-bust cycles remind us that knowing how to think about life is a prerequisite for knowing how to think about business.
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.