The economic boom, as a phase of an economic cycle, is a phenomenon that occurs when economic activity experiences a notable expansion. In the economic boom, this expansion is translated into other indicators such as income and employment, which also reach their maximum level.
The economic boom is a phenomenon that occurs when the economic cycle experiences a strong expansion. This expansion translates into large increases in economic activity, which have direct effects on consumption, income and employment. This phase of the business cycle usually brings, in turn, periods of full employment in the economy.
This phase, although it should not be the case, is always followed by a recession phase. In this phase, after the great economic expansion, the economy tends to adjust and moderate the growth rates of the different variables.
This term is also used to refer to the massive purchase of assets in financial markets, making their value more expensive.
The economic boom as a phase of the economic cycle
The economic boom phase, as we mentioned, is a phase that is integrated into the economic cycle that an economy experiences, so its behavior is usually temporary. In other words, this phase of the economic cycle is preceded by a different one, while at the same time a different one occurs. The phases that limit it are usually, in the first place, the one that precedes it, of economic expansion. While, secondly, the one that happens, which is the economic recession. That is, the sequence is: economic expansion, economic boom and economic recession. Additionally and including the phases described from Economipedia, we could say that the sequence is economic expansion, economic boom, boom and recession.
The economic boom is usually linked, in the phase of economic growth, to economic expansion:
The economic boom, in the economic cycle, is also usually characterized as economic expansion. However, this term is often used in situations where the expansion is more abrupt and prolonged than usual, producing a more prominent growth than normal.
With all this, it would be better expressed as follows:
In this way, the economic boom could be characterized as one more phase of the economic cycle, attributed to situations or scenarios of a conjunctural nature, which are characterized by being phases of great expansion of the economy, as well as its components.
In practice, for example, we can identify it in the growth that Spain experienced between 1959 and 1974. During this period, the Spanish economy, after the approval of development plans with the dictator Francisco Franco, opened up to international markets. This fact, together with another series of events such as the advance of industrialization or the promotion of tourism, caused what is known as the “Spanish economic miracle”.
This "economic miracle" was characterized by being, precisely, a prolonged period of time in which the economic expansion not only produced greater growth than expected, but also that clear improvement in income levels and employment in the country.
The other economic boom
The economic boom does not only refer to these phases of expansion that an economy is experiencing. Also, on the other hand, it refers to sudden increases in the value of a company’s shares, triggering demand in an uncontrolled process of euphoria. This fact, in the stock market, is often called an economic boom.
In the same way, when a sector or a company experiences very abrupt increases in its profits, as well as the value and demand for its goods or services, we also tend to call this type of scenario with the term economic boom.