ANTI-CYCLICAL ECONOMIC POLICY, WHAT IS (WIKIPEDIA)

ANTI-CYCLICAL ECONOMIC POLICY, WHAT IS (WIKIPEDIA)

Anti-cyclical economic policy

Source: Wikipedia, the free encyclopedia.

An anti-cyclical economic policy consists of the set of governmental actions to prevent, overcome or minimize the effects of the economic cycle.

Economic cycles are fluctuations in economic activity, inherent to capitalism and characterized by alternating periods of rise (peaks) and periods of recession (valleys, that is, the lowest point of cycle). Economic cycles under the over-accumulation or overproduction, which follows expectations of declining rate of profit (or profit rate is less than the interest rate), which causes the reduction of investment and deceleration in activity level. Exogenous factors, such as the oil shocks and financial crises can help to reverse the cycle and accentuate its effects.

Countercyclical policies are defended by the Keynesians, who believe that the economic cycle is not, self-regulatory body, as they thought the neoclassicals. According to the Keynesian school the public deficit is the main instrument of economic policyto mitigate the effects of the cycle. Thus, during the recession, the Government should intervene, reducing taxes, promoting the expansion of credit and the increased spending, investing able to stimulate the economy. In this way, during the recession,the budget deficit must expand in order to reestablish the economic balance. The opposite should occur during the ascending phase of the cycle: during periods of prosperity, the State must increase taxation, constituting a surplus to pay off their debtsand to form a reserve fund that can be used during periods of recession (or depression).

In Brazil, the second national development plan (PND), partially implemented by the Government Geisel during the first oil shock (second half of 1973), can be considered as an example, although not very successful, anti-cyclical policy. [1] another example, more recent, is the growth acceleration program-CAP-, features and development, aimed at countercyclical promote economic growth through increased public spending on infrastructure works. Already the program my house, my life, which aims to build one million homes, also has a counter-cyclical nature insofar as it promotesan increase in the level of investment and employment in construction. [2] also the role of the BNDES to finance investments. [3]