As noted by Kindleberger (2005), “…the cycle of manias and panics results from the pro-cyclical changes in the supply of credit; the credit supply increases rapidly in good times, and then when economic growth slackens, the rate of growth of credit has often declined sharply… Minsky believed that pro-cyclical increases in the supply of credit in good times and the decline in the supply of credit in less buoyant economic times led to fragility in financial arrangements and increased the likelihood of financial crisis.” The Basel Committee broadly defines pro-cyclicality as the adverse feedback mechanisms through which the financial system can amplify business fluctuations and possibly cause or exacerbate financial instability.
For both producers and users of forecasts, it is also worth looking back at forecast errors - not to berate the forecasters, but rather to see what we can learn from those errors about the way the economy works. Evidence on accuracy It has long been understood that economic forecasts are not all that good.