Procyclicale

Procyclicale is an economics term used primarily in Italian-language literature to describe variables, indicators, or policies that move in the same direction as the business cycle. In English-language economics, the corresponding term is procyclical, and the related noun is procyclicality (or procyclicality).

Definition and concept

A procyclical variable increases when the economy expands and decreases when the economy contracts. This contrasts with countercyclical variables, which move in the opposite direction to the overall economy. Procyclicality can apply to various economic dimensions, including output, employment, prices, and revenue, depending on the underlying mechanisms and data.

Examples

Commonly cited procyclical indicators include real GDP growth, employment, consumer spending, and investment, which tend to rise in upswings. Inflation can be procyclical in many contexts, rising when demand is strong. Tax receipts often show procyclical behavior as growth lifts incomes. In financial markets, credit expansion may be procyclical, expanding in good times and tightening in recessions.

Policy relevance

Procyclicality has important implications for macroeconomic stability. Procyclical fiscal or monetary responses can amplify fluctuations rather than dampen them. As a result, stabilizing policies—such as automatic stabilizers, countercyclical spending, or macroprudential measures—aim to reduce procyclicality and smooth the business cycle.

Origin and usage

The term procyclicale is the Italian form corresponding to the English term procyclical. In English-language texts, the noun form is procyclicality or procyclicality, and the concept is closely linked to discussions of the business cycle and macroeconomic stabilization.