THE RELEVANCE OF CYCLICITY FOR CENTRAL BANKS’ DIRECTIONS OF ACTION

The extent and severity of the global financial and economic crisis, which started with the subprime credit crisis in the US, has revived discussions on the issue of economic cycles and the stabilizing role of state policies in the context of cyclicity. The decline in global GDP growth rate in 2009 was significant, with the economic downturn being triggered and amplified by financial factors. The purpose of this article is to argue for the relevance of cyclicity for central banks’ directions of action. The article reviews briefly the determinants of business cycles, and presents the peculiarities of the financial cycle, as well as the causes of the boosting effect of financial fluctuations for the economic cycle. It also highlights the current views on central bank's interventions to prevent financial imbalances, with a focus on the post-crisis situation.