ECON 222 Lecture Notes - Lecture 19: Procyclical And Countercyclical, Business Cycle, Canadian Business
ECON 222 Week 9 Lecture 1 002
(Chapter 8 continued)
• Unlike the seasonal cycle (economic fluctuations over the seasons of the year), the
business cycle is not periodic in that it does not occur at regular, predictable intervals.
• The business cycle does not last for a fixed length of time.
• It is, however, recurrent.
• Persistence: declines in economic activity are usually followed by further declines, and
growth usually followed by more growth (until turning points are reached)
The Canadian Business Cycle
a. Look at figure 8.1 and 8.2 in textbook
Important Facts:
1) Real GDP has increased by an average of 2.1% per year since 1870.
2) The period between Confederation (1867) and WWI (1914-1918) is characterized by
rapid growth and frequent recessions.
3) The period between WWII (1945) and 2013, the number of months of expansion were
greater than the number of months of contraction, by more than 5 to 1.
4) The two largest contractions experienced in Canada’s history were from 1920-1921, and
the Great Depression (1929-1933)
5) Three important modern recessions:
a. 1981-1982 recession
b. 1990-1991 recession
c. 2008-2009 financial crisis
6) Since 1945, contractions have shortened and expansions have lengthened.
7) Volatility in the economy has fallen significantly since the early 1980’s.
The Cyclical Behaviour of Economic Variables: Direction and Timing
• Procyclical: when an economic variable moves in the same direction as aggregate
economic activity.
o Examples: industrial production, consumption, investment, inflation.
• Countercyclical: an economic variable that moves in opposite direction as aggregate
economic activity.
o Examples: unemployment.
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ECON 222 Full Course Notes
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