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The Relevance Of Cyclicity For Central Banks’ Directions Of Action

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  • Dorina Clichici

Abstract

The extent and severity of the global financial and economic crisis, which started with the subprime credit crisis in the US, has revived discussions on the issue of economic cycles and the stabilizing role of state policies in the context of cyclicity. The decline in global GDP growth rate in 2009 was significant, with the economic downturn being triggered and amplified by financial factors. The purpose of this article is to argue for the relevance of cyclicity for central banks’ directions of action. The article reviews briefly the determinants of business cycles, and presents the peculiarities of the financial cycle, as well as the causes of the boosting effect of financial fluctuations for the economic cycle. It also highlights the current views on central bank's interventions to prevent financial imbalances, with a focus on the post-crisis situation.

Suggested Citation

  • Dorina Clichici, 2016. "The Relevance Of Cyclicity For Central Banks’ Directions Of Action," Impact of Socio-economic and Technological Transformations at National, European and International Level (ISETT), Institute for World Economy, Romanian Academy, vol. 13.
    • Handle: RePEc:iem:imptrs:v:13:y:2016:id:2822000009632035
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    More about this item

    Keywords

    business cycle; financial cycle; central banks; monetary policy; economic theory;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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