[Economic Term] Procyclicality

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The economic term of the day is procyclicality.

Procyclicality usually means that the effects of economic entities' risk perception and behavior, financial systems and regulations, etc. move in the same direction as economic fluctuations.
For example, in the case of bank loans, during boom times, loan review standards are relaxed due to optimistic expectations for the future, leading to a greater increase, contributing to economic expansion.
On the other hand, during a recession, screening standards are strengthened and lending decreases significantly, further fueling the recession.
This pro-cyclical lending behavior of bank loans further increases the amplitude of economic fluctuations by accelerating credit expansion or contraction.
Therefore, policy authorities are working to develop countercyclical policy tools that can alleviate procyclicality when developing policies.

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