A Juglar cycle is a medium-term business cycle, typically around 7 to 11 years, associated with waves of fixed investment, credit expansion, and subsequent correction.
Typical Sequence
- Expansion: credit grows, investment rises, profits improve.
- Peak: capacity constraints and financial fragility build.
- Downturn: tighter credit and weaker demand reduce investment.
- Recovery: balance sheets repair and a new expansion starts.
Mechanism
The cycle is often interpreted as interaction between investment expectations and financing conditions. When optimism and credit reinforce each other, booms extend; when profits disappoint and credit tightens, contraction follows.
Why It Matters
Juglar-type dynamics help explain why recessions often coincide with investment slumps rather than only consumption shocks. Monitoring corporate leverage and credit quality is therefore central to macroprudential policy.