Procyclical and countercyclical variables

<p>Procyclical and countercyclical variables are variables that fluctuate in a way that is positively or negatively correlated with <a href="/facts/Business_cycle/etH0t44s">business cycle</a> fluctuations in <a href="/facts/Gross_domestic_product/zQRgyFKc">gross domestic product</a> (GDP).  The scope of the concept may differ between the context of <a href="/facts/Macroeconomics/4dcQAdCr">macroeconomic</a> theory and that of <a href="/facts/Economic_policy/LfbTfPkm">economic policy</a>–making. 
</p><p>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 increase <a href="/facts/Government_spending/vEFbaTCX">government spending</a> and reduce <a href="/facts/Taxes/8cXNkA00">taxes</a> during an <a href="/facts/Economic_expansion/HjVopBvp">economic expansion</a>, but reduce spending and increase taxes during a <a href="/facts/Recession/ncYpUqmr">recession</a>. 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 <a href="/facts/Recession/ncYpUqmr">recession</a>.
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Procyclical and countercyclical variables open-in-new

Procyclical and countercyclical variables