Cyclical asymmetry

Cyclical asymmetry is an economic term which describes any large imbalance in economic factors that occur due to purely cyclical reactions by a market or nation. This can include employment rates, debt retention, interest rates, bond strengths, or stock market imbalances.

Contents

Types of cyclical asymmetry

There are two main types of CA: fiscal and economic. While there are equivalents to cyclical asymmetries in investment banking and stock market transactions, these systems are designed to deal with such things.

Fiscal cyclical asymmetry

Fiscal CA is based on national or international changes to fiscal policy as a result of cyclical intervention in money markets or currency exchanges.[1] A simple example is the reaction of the US Federal Reserve to raise interest rates when the dollar performs too well against other currencies such as the euro and the yen. Since currency exchanges are often predilated on the results of economic changes such as quarterly profit results, the Federal Reserve has to be cautious not to overreact or such fiscal changes will actually excacerbate the situation by making investment in America more attractive than equalizing exchange rates.[2] When this does occur, it is a cyclical asymmetry.

Economic cyclical asymmetry

Economic CA is usually based on cyclical trends in national markets, such as the labor market. A simple example of this can be found in the yearly changes in demand for labor. Job markets are, by nature, cyclical, with upswings in certain sectors such as retail near year's end, and in construction during the spring and summer.[3] While job creation and destruction as a national whole average usually equalize, when disturbances in the markets occur, the disruptions can cause higher than usual unemployment, which has a negative effect on the economy and causes further economic stress.[4]

Causes of cyclical asymmetry

The primary cause of cyclical asymmetry is rapid change in an otherwise regularly cyclical model, and overreactions to counteract such changes. Similar to a man walking across a swaying tightrope, any economic model subject to cyclical stressors must find a balance. When it does not, cyclical asymmetries occur.

Effects

Cyclical asymmetry is a form of nonlinear economics and, as such, its effects can be widely varied. However, the primary identification of a cyclical asymmetry is that resources, results, or actions taken to correct a change result in an unequal distribution of a resource or factor, which always leads to a disruption.[5]

In economics, particularly with fiscal policy, poorly chosen compensating actions can result in multiple CAs, spiralling out of control into depression. The Great Depression could be construed[by whom?] as a result of cyclical asymmetry carried to ridiculous extremes, with most economic and fiscal policy bent to the ideal of mass speculation and investment over rational investment on assets.

References

  1. ^ Timo Teräsvirta. Modelling Nonlinear Economic Relationships Published 1993 Oxford University Press. ISBN 019877320X
  2. ^ R. Burdekin, Farrokh K. Langdana. Confidence, Credibility and Macroeconomic Policy: past, present, future. Published 1995 Routledge (UK) ISBN 0415102782
  3. ^ J. Bradford De Long & Lawrence H. Summers, 1986. "Are Business Cycles Symmetric?," NBER Working Papers 1444, National Bureau of Economic Research, Inc
  4. ^ Ramsey, J.B. & Rothman, P., 1993. "Time Irreversibility and Business Cycle Asymmetry," Working Papers 93-39, C.V. Starr Center for Applied Economics, New York University
  5. ^ David Andolfatto. Evidence and Theory on the Cyclical Asymmetry in Unemployment Rate Fluctuations. Canadian Journal of Economics, 1997, vol. 30, issue 3, pages 709–21

See also


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • nervous system, human — ▪ anatomy Introduction       system that conducts stimuli from sensory receptors to the brain and spinal cord and that conducts impulses back to other parts of the body. As with other higher vertebrates, the human nervous system has two main… …   Universalium

  • Time — This article is about the measurement. For the magazine, see Time (magazine). For other uses, see Time (disambiguation). The flow of sand in an hourglass can be used to keep track of elapsed time. It also concretely represents the present as… …   Wikipedia

  • cryptology — cryptologist, n. cryptologic /krip tl oj ik/, cryptological, adj. /krip tol euh jee/, n. 1. cryptography. 2. the science and study of cryptanalysis and cryptography. [1635 45; < NL cryptologia. See CRYPTO , LOGY] * * * Introduction …   Universalium

  • Dependency theory — International relations theory  • Idealism  Liberalism   …   Wikipedia

  • Earth Sciences — ▪ 2009 Introduction Geology and Geochemistry       The theme of the 33rd International Geological Congress, which was held in Norway in August 2008, was “Earth System Science: Foundation for Sustainable Development.” It was attended by nearly… …   Universalium

  • Timeline of cosmology — This timeline of cosmological theories and discoveries is a chronological catalog of the evolution of humankind s understanding of the cosmos over the last two plus millennia. Modern cosmological conceptions follow the development of the… …   Wikipedia

  • Brassiere — This article is about the female undergarment. For the restaurant, see Brasserie …   Wikipedia

  • Domestic violence — Domestic disturbance redirects here. For the 2001 film, see Domestic Disturbance. Domestic violence Classification and external resources eMedicine article/805546 MeSH …   Wikipedia

  • Mania — This article is an expansion of a section entitled Mania from within the main article Bipolar disorder. For other uses, see Mania (disambiguation). Manic episode Classification and external resources ICD 10 F30 …   Wikipedia

  • Mergers and acquisitions — Merger redirects here. For other uses, see Merge (disambiguation). For other uses of acquisition , see Acquisition (disambiguation). Accountancy Key concepts Accountant · Accounting period · Bookkeeping · Cash and accrual basis …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.