Procyclicality Symposium: Measurement, Policy Implications, and Financial Stability

Conference dates

30 Mar 2023 - 31 Mar 2023


Federal Reserve Board, Washington DC, USA


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.


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.

Submission Topics

The organizing committee invites research submissions on topics related (but not limited) to the following:

• Definition and measurement of pro-cyclicality
o What evidence should policymakers be looking for to assess the extent to which procyclicality poses a risk to financial stability? How can one measure procyclicality?
o What are the empirical challenges in identifying such evidence? For example, have accounting standards for loan loss allowances exacerbated or damped procyclicality concerns in banking regulations?
o How can one disentangle demand- and supply-side effects when measuring procyclicality?
o What hurdles do policymakers face in identifying causal links and feedback loops between the financial sector, including the banking industry, and the real economy? What types of data are needed to help overcome these challenges?

• Behavioral concerns
o Are there more fundamental problems (for example, relating to management incentives, behavioral biases, and interactions with prudential regulations and accounting standards) that need further consideration when evaluating procyclicality effects?
o How does discretion around the interpretation and implementation of regulations, accounting standards, and enforcement rules affect procyclicality?
o Should discretion be considered in theoretical and empirical work on procyclicality? If so, how?

• Economic considerations
o How can we better understand the relationship between procyclicality and exogenous economic shocks (for example, COVID-19)?
o In what ways can we incorporate banks’ endogenous responses to regulations, accounting standards, and enforcement rules?
o How should we measure the economic costs of procyclicality?
o Relatedly, how should we measure the economic benefits aimed at mitigating procyclicality?

• Countercyclical policy framework
o Why have policymakers or policy designers advocated for establishing a countercyclical capital framework? Are there other regulatory frameworks that deserve to have an embedded countercyclicality feature?
o Should policymakers be required to build a countercyclical feature into every policy they create? What are the unintended consequences of doing so?

Submission Format and Target Date

Complete manuscripts (not just abstracts) should be submitted electronically in PDF format by December 1, 2022, to Authors of accepted papers will be notified by January 27, 2023.


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).