What does procyclical mean?
What does procyclical mean?
Procyclic refers to a condition of a positive correlation between the value of a good, a service, or an economic indicator and the overall state of the economy.
What are procyclical indicators?
A procyclical economic indicator is a time series, per se or in conjunction with another time series, that moves simultaneously and in the same direction as the up and down movements related to the economy as a whole or to a part of it.
What is procyclical policy?
What is pro-cyclical fiscal policy? In a pro-cyclical fiscal policy, the government reinforces the business cycle by being expansionary during good times and contractionary during recessions. Pursuing a pro-cyclical fiscal policy is generally regarded as dangerous.
What is procyclical effect?
What is procyclicality? Strictly speaking, procyclicality refers to the tendency of financial variables to fluctuate around a trend during the economic cycle. Increased procyclicality thus simply means fluctuations with broader amplitude.
What is a procyclical economy?
In business cycle theory and finance, any economic quantity that is positively correlated with the overall state of the economy is said to be procyclical. That is, any quantity that tends to increase in expansion and tend to decrease in a recession is classified as procyclical.
Why is investment procyclical?
10. Procyclicality is defined as investing in the short term in a way that could exacerbate market movements and contribute to asset price volatility (including through asset price feedback loops), or investing in the medium term in a way that might exaggerate the peaks and troughs of asset price or economic cycles.
Is investing procyclical?
Why is inflation procyclical?
Inflation is procyclical as it tends to rise during booms and falls during periods of economic weakness. Measures of inflation are also coincident indicators. Consumption and consumer spending are also procyclical and coincident.
Is monetary policy procyclical?
In practice, in many developing countries fiscal policy has the opposite properties: it is procyclical. In particular, government spending as a share of GDP goes up during booms and down in recessions, while deficits increase in booms and decrease in recessions.
Are taxes procyclical?
Under the most realistic parameterization in which the ratio of government spending to private consumption (which is the tax base) is higher (lower) in the bad (good) state of nature, tax rate policy is procyclical.