Procyclical in addition to countercyclical variables

Procyclical & countercyclical variables are variables that fluctuate in the way that is positively or negatively correlated with business cycle fluctuations in gross home product GDP. the scope of the concept may differ between the context of macroeconomic impression in addition to that of economic policy–making.

The concept is often encountered in the context of a government's approach to spending and taxation. A 'procyclical fiscal policy' can be summarised simply as governments choosing to include government spending and reduce taxes during an economic expansion, but reduce spending and put taxes during a recession. A 'countercyclical' fiscal policy takes the opposite approach: reducing spending and raising taxes during a boom period, and increasing spending and cutting taxes during a recession.

Economic policy making

Procyclical has a different meaning in the context of economic policy. In this context, it intended to any aspect of economic policy that could magnify economic or financial fluctuations. Of course, since the effects of specific policies are often uncertain or disputed, a policy will be often procyclical, countercyclical or acyclical according to the opinion of the one judging it.

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Conversely, an economic or financial policy is called countercyclical whether it works against the cyclical tendencies in the economy. That is, countercyclical policies are ones that cool down the economy when this is the in an upswing, and stimulate the economy when it is for in a downturn.

] name 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. When the government adopts a countercyclical fiscal policy in response to a threat of recession the government might increase infrastructure spending.