what is countercyclical regulation in economics?

There will be cycles of alternating prosperity and depression in economic operation. Counter-cyclical regulation means macro-policies, including monetary and fiscal policies. In depression, loose monetary policies and active fiscal policies will be implemented, and in prosperity, tight fiscal policies and monetary policies will be adopted to curb bubbles ~ ~ The details will depend on the situation.

Introduction of counter-cycle

In the boom stage, enterprises tend to increase investment and have higher costs, which is likely to happen in the subsequent recession. If we can grasp this economic cycle law and use it reasonably, we can get good results. For example, in the boom stage, we should avoid a substantial increase in fixed assets investment, equity investment, and a substantial expansion of business scale; In the recession, the prices of fixed assets and equity have fallen sharply. At this time, we can increase investment in fixed assets, purchase equity and expand business scale against the trend. This is the "counter-cyclical" strategy.

what is "countercyclical capital"?

Simply put, when the economic environment is good, banks draw money loss reserves in advance, and then take out these currencies to grow when the economic environment is bad.

what is the countercyclical factor?

The position holding period is simply the time when we hold a trading contract, the time difference between the moment you open an order and the time when you plan to close the position, which is the so-called period.

Hello, what is a countercyclical industry

Any industry has its periodicity, such as mutton catering in winter and crayfish in summer, but there may also be countercyclical products, such as eating hot pot in summer. Simply put, it is that the current industry cycle is not suitable for cooking.

as for the quasi-cyclical industry you mentioned, its existence time is very short, and the principle is the same. It was time for structural transformation, but suddenly a new growth point emerged.

how to judge whether it is countercyclical or procyclical?

Let's look at the current economic operation. Generally, the economy will run alternately in four economic cycles: recovery, prosperity, recession and depression.

if the economy is in a prosperous period, social investment and consumption will show optimistic expectations, and production and sales in various industries will be active. on the contrary, when the economy is in a recession, social investment and consumption will show expectations of sadness and joy, and everyone will hold their wallets and the market will be depressed, which can be understood as pro-cyclical behavior. Pro-cyclical has the characteristics of helping the ups and downs and helping the downs.

Of course, if the economy continues to prosper and overheat, it will inevitably lead to a series of problems such as inflation and asset price bubbles. At this time, * * * will introduce policies to regulate and stabilize the economy, such as raising interest rates and raising the reserve ratio of commercial banks. On the contrary, if the economy continues to decline and slump, it will also produce a series of social problems, such as bankruptcy of enterprises and rising unemployment rate. At this time, * * * will also introduce policies to regulate and stabilize the economy, and reduce interest rates, taxes, reserve ratio of commercial banks and other policies to * * * economic growth. In order to curb the bubble in prosperity, tight fiscal policy and monetary policy are adopted, and loose monetary policy and active fiscal policy are implemented in depression, which is counter-cyclical regulation.

in a word, it's simple: economic behaviors that are synchronized with the current economic situation are called procyclical, and those that are not synchronized are called countercyclical.

economy, what is countercyclical adjustment?

There will be cycles of alternating prosperity and depression in economic operation. Counter-cyclical regulation means macro-policies, including monetary and fiscal policies. In depression, loose monetary policies and active fiscal policies will be implemented, and in prosperity, tight fiscal policies and monetary policies will be adopted to curb bubbles ~ ~ The details will depend on the situation.

What does it mean that the Bank of England will reduce the counter-cyclical capital buffer ratio to zero?

Counter-cyclical regulation mechanism is the macro-prudential policy framework that people often discuss recently. The author believes that some tools for financial institutions in countercyclical adjustment, such as countercyclical capital buffer and expected loss reserve, can be roughly understood as: the mechanism of "more losses than compensation" established by financial institutions on the time axis in response to economic cycle fluctuations. That is to say, reserve in the period of economic boom to offset the losses in the period of economic recession, and then make effective positive feedback for ironing out the economic cycle. This institutional arrangement is to make financial institutions "responsible for themselves". In fact, we already have a similar mechanism at the industry level. For example, the central bank collects deposit reserves to prepare for the rescue of risky commercial banks; Another example is the deposit insurance mechanism implemented by some countries for deposit and loan institutions, which provides a certain degree of protection for depositors. These are all institutional arrangements that make the financial industry "responsible for itself". People hope that these financial safety nets can maintain the operation of financial institutions and markets in a safe and stable framework, and once risks occur, there will be a backup buffer mechanism to play a role, reducing the probability and degree of systemic risks and reducing the impact on the economy. Why do we urgently need a macro-prudential policy framework now? The author thinks of a story of the ancients, that "there is no favor in paying for a detour, and the guests are overwhelmed": in ancient times, the chimney of a family was bent, and it was pointed out that this bend might accumulate heat, so don't pile firewood next to it, otherwise it would cause a fire. The family didn't listen. Soon, a fire broke out in this family. Fortunately, the neighbors saved the fire in time and escaped. During the celebration, the neighbors who were burned to death by heroic fire fighting were all guests and seated, but those who had given fire prevention advice calmly before were not among the thanked. Rational thinkers are always less recognized than emotional doers. This story can be used to vividly compare the embarrassing position of the central bank in the process of macro-control decision-making: when the economy is in a downturn, the central bank maintains a loose monetary policy, increases money supply and maintains a low benchmark interest rate to expand demand and boost the economy. When the economy picks up and shows signs of rising, the central bank's natural duty of stabilizing the currency value and its intention to tighten the currency in a forward-looking way will inevitably be forced by the financial system, the real economic sector and local governments. This kind of forced game is highlighted as "doing big things quickly", local projects, and financial institutions. As a result, the scene of "chaos as soon as it is released" is once again staged. Until the economy overheats and inflation gradually hits its head, the public will question that the central bank is too slow to respond, and should not implement the easing policy for a long time, indulge in the flood of money supply or abuse the low interest rate policy. At that time, the central bank adopted a market-oriented monetary policy regulation method, which had a long time lag and was difficult to put out a fire in the near future. Second, the control object lacks risk constraints and is inherently insensitive to price signals such as interest rates, so the control effect is difficult to be immediate. On the balance, we have to rely on administrative and total-scale control measures, and the risk of hard landing of "one tube will die" will increase accordingly. Author: Afterglow Author: China People's Bank Office.