Countercyclical

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Countercyclical is a term used in economics to describe how an economic quantity is related to economic fluctuations. It is the opposite of procyclical. However, it has more than one meaning.

Meaning in policy making

An economic or financial policy is called 'countercyclical' (or sometimes 'activist') if it works against the cyclical tendencies in the economy.^[1] That is, countercyclical policies are ones that cool down the economy when it is in an upswing, and stimulate the economy when it is in a downturn.^[2]

Keynesian economics advocates the use of automatic and discretionary countercyclical policies to lessen the impact of the business cycle. One example of an automatically countercyclical fiscal policy is progressive taxation. By taxing a larger proportion of income when the economy expands, a progressive tax tends to decrease demand when the economy is booming, thus reining in the boom.

Other schools of economic thought, such as monetarism and new classical macroeconomics, hold that countercyclical policies may be counterproductive or destabilizing, and therefore favor a laissez-faire fiscal policy as a better method for maintaining an overall robust economy.

Meaning in business cycle theory

In business cycle theory, any economic quantity that is negatively correlated with the overall state of the economy is said to be 'countercyclical'.^[3][4] That is, any quantity that tends to increase when the overall economy is growing is classified as procyclical. Quantities that tend to increase when the overall economy is slowing down are classified as 'countercyclical'. Unemployment is an example of a countercyclical variable.^[5]

Similarly, in finance, an asset that tends to do well while the economy as a whole is doing poorly, is typically referred to as countercyclical. For example, this could be a business, or a financial instrument whose value is derived from a business, that sells an inferior good.

See also

• Business cycle
• Procyclical

Notes

1. ^ Fiscal Policy
2. ^ Feldstein, Martin (September 2002). The Role for Discretionary Fiscal Policy in a Low Interest Rate Environment. NBER Working Paper No. 9203. http://www.nber.org/papers/w9203. 
3. ^ Procyclic Investopedia Retrieved on 27 December 2007
4. ^ A. Abel and B. Bernanke (2001), Macroeconomics, 4th edition, Section 8.3.
5. ^ A. Abel and B. Bernanke (2001), Macroeconomics, 4th edition, Section 8.3, Summary Table 10.

This article related to macroeconomics is a stub. You can help Wikipedia by expanding it.v · Categories: Macroeconomics Business cycle Macroeconomics stubs Wikimedia Foundation. 2010. Игры ⚽ Поможем сделать НИР Kojidan Carbuncle (mythology) Look at other dictionaries: countercyclical — coun‧ter‧cyc‧li‧cal [ˌkaʊntəˈsɪklɪkl, ˈsaɪ ǁ tər ] adjective ECONOMICS 1. not following the normal pattern of business activity, for example increasing when other activities are decreasing: • The aircraft engineering division will not be sold,… …   Financial and business terms countercyclical — [kount΄ər sik′li kəl] adj. designating or of fiscal policy that attempts to minimize extreme fluctuations in the business cycle, as by increasing spending and reducing taxes during periods of decline …   English World dictionary countercyclical — |kau̇ntə(r)+ adjective Etymology: counter + cyclical : calculated to check excessive developments in a business cycle : compensatory countercyclical budget policies of the government * * * /kown teuhr suy kli keuhl, sik li /, adj. opposing the… …   Useful english dictionary countercyclical — adjective Date: 1944 calculated to check excessive developments in a business cycle ; compensatory < countercyclical budget policies > • countercyclically adverb …   New Collegiate Dictionary countercyclical — /kown teuhr suy kli keuhl, sik li /, adj. opposing the trend of a business or economic cycle; countervailing: a countercyclical monetary policy. [COUNTER + CYCLICAL] * * * …   Universalium countercyclical — adjective a) Moving in the opposite direction as the overall state of an economy The unemployment rate is countercyclical, its lower when economic health is high, and higher when the economic health is lower. b) Dampening the cyclical… …   Wiktionary countercyclical — coun·ter·cyclical …   English syllables countercyclical — coun•ter•cy•cli•cal [[t]ˌkaʊn tərˈsaɪ klɪ kəl, ˈsɪk lɪ [/t]] adj. bus opposing or designed to oppose a trend, esp. that of an economic cycle • Etymology: 1950–55 …   From formal English to slang countercyclical stocks — stocks whose price tends to rise when the economy is in recession or the market is bearish, and vice versa. Bloomberg Financial Dictionary …   Financial and business terms Антициклическая бюджетно-налоговая политика — (COUNTERCYCLICAL FISCAL POLICY) подход, в соответствии с которым государству рекомендуется прибегать к дефициту бюджета при существовании рецессионного разрыва и к бюджетному излишку при инфляционном разрыве …   Современные деньги и банковское дело: глоссарий 18+ © Academic, 2000-2024 Contact us: Technical Support, Advertising Dictionaries export, created on PHP, Joomla, Drupal, WordPress, MODx. Mark and share Search through all dictionaries Translate… Search Internet Share the article and excerpts Direct link … Do a right-click on the link above and select “Copy Link”