Procyclicality Symposium: Measurement, Policy Implications, and Financial Stability

March 30-31, 2023

Federal Reserve Board (hybrid format)

The Federal Reserve Board will host a procyclicality symposium in a hybrid format on March 30–31, 2023. This symposium is organized by the Federal Reserve Board, the Bank of England, the Deutsche Bundesbank, and the Office of the Comptroller of the Currency. The symposium will promote discussion and dissemination of innovative theoretical and empirical research on the financial stability implications of procyclicality. This event is invite-only.

The 2007–09 financial crisis revealed critical interlinkages between the financial sector, including the banking industry, and the real economy that exacerbated economic conditions and threatened financial stability. Many academic researchers, policymakers, and industry practitioners analyze these connections under the broad guise of "procyclicality," making it difficult to compare and interpret findings and policy implications across studies.

This inconsistency highlights how critical it is, for prudential policy purposes, that research be grounded in a common definition and concept of procyclicality. In the economics literature, "procyclicality" was originally used to describe an economic or financial variable's co-movement with aggregate economic activity. For example, some have said that bank lending is procyclical because it moves in line with economic conditions. On the one hand, this co-movement often arises inevitably—for example, through demand-side effects—and may not necessarily reflect a structural failure or signal a cause for concern. On the other hand, if the co-movement arises through a causal link (between the economy and a bank behavior shift) that leads to a credit supply shortage, this reduction in lending may suggest a market disruption or a market failure that warrants policy intervention.

The organizers of the conference are Fang Du (Supervision and Regulation Division, Federal Reserve Board), William Francis (Policy, Strategy, and Implementation Division, Bank of England), Diana Hancock (Research and Statistics Division, Federal Reserve Board), Marcus Pramor (Directorate General Banking and Financial Supervision, Deutsche Bundesbank), and Natalya Schenck (Supervision Risk and Analysis, Office of the Comptroller of the Currency).

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Last Update: March 08, 2023