A credit boom-bust cycle is an episode characterized by a sustained increase in several economics indicators followed by a sharp and rapid contraction.^{[citation needed]}

Commonly the boom is driven by a rapid expansion of credit to the private sector accompanied with rising prices of commodities and stock market index. Following the boom phase, asset prices collapse and a credit crunch arises, where access to financing opportunities are sharply reduced below levels observed during normal times. The unwinding of the boom phase brings a considerably large reduction in investment and fall in consumption and an economic recession may follow.

The recession following the burst of the episode is oftentimes short-lived, GDP and consumption growth usually resume within a year. In the financial sector of the economy the recovery is slower and credit remains depressed for several periods. Credit falls more sharply than GDP and the cost of borrowing remains higher compared to normal times.

A boom-bust cycle is also associated with the existence of bubbles in stock market that lead to a period of accelerated investment and over borrowing. After the buildup there is a stock market crash which is often attributed to speculative behavior and Herd behavior on the part of investors. All these studies share the following findings. During the build up of the boom there is rapid expansion in credit to the private sector, GDP, consumption and investment also grow above their rates observed during tranquil times. The non-tradable sector of the economy, that is economic activities produced only for domestic consumption, experiences faster growth, and the real exchange rate appreciates. During the boom banks extended more credit to the non-tradable sector of the economy, and there is a surge of capital flows into the country. Capital inflows tend to be 4% above its long run trend in the year previous to the crisis; similarly the price of housing is 15% above its trend one year before the bust.

James Gordon Brown (born 20 February 1951) is a British Labour Party politician who was the Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 until 2010. He previously served as Chancellor of the Exchequer in the Labour Government from 1997 to 2007, becoming the longest-serving holder of that office in modern history. Brown has been a Member of Parliament (MP) since 1983, for Dunfermline East until 2005, and currently for Kirkcaldy and Cowdenbeath.

Brown became Prime Minister on 27 June 2007, after the resignation of Tony Blair and three days after becoming Leader of the governing Labour Party. His tenure ended on 11 May 2010, when he resigned as Prime Minister and Leader of the Labour Party. Brown was one of only three people to serve in the Cabinet continuously from Labour's victory in 1997 until its defeat in 2010, the others being Jack Straw and Alistair Darling.

Brown has a PhD in history from the University of Edinburgh and spent his early career working as a lecturer at a further education college and a television journalist. He has been a Member of Parliament since 1983; first for Dunfermline East and since 2005 for Kirkcaldy and Cowdenbeath. As Prime Minister, he also held the offices of First Lord of the Treasury and the Minister for the Civil Service.