Cyclical asymmetry
Cyclical asymmetry is an economic term that describes any large imbalance in economic factors occurring for purely-cyclical reactions by a market or nation. That may include employment rates, debt retention,
Types
There are two main types of cyclical asymmetry: fiscal and economic.
Fiscal cyclical asymmetry
Fiscal cyclical asymmetry is based on national or international changes to
Economic cyclical asymmetry
Economic cyclical asymmetry is usually based on cyclical trends in national markets, such as the labor market. A simple example is 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
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
Effects
Cyclical asymmetry is a form of nonlinear economics and so 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.
See also
References
- ISBN 0-19-877320-X
- ISBN 0-415-10278-2
- ^ J. Bradford De Long & Lawrence H. Summers, 1986. "Are Business Cycles Symmetric?," NBER Working Papers 1444, National Bureau of Economic Research, Inc
- ^ 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
- ^ 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