The purpose of the paper is to explain the concept of economic cycles, to describe their basic characteristics, to define the concept of capital market and to clarify its development and properties. The key objective is to explain the correlation of economic cycles with market capitalization in the Republic of Croatia, which has been elaborated and described in detail through graph analysis. The first part defines the concept of cycles, their characteristics and basic species. Thereafter, there is a more complex elaboration of the theory of economic cycles. In addition, the capital market, its core features and development in the Republic of Croatia and the most important institutions will be explained. In the second part of the paper, the concept of the capital market is defined, its basic department on four basic markets, followed by the definition of the stock market and stock indexes. The last chapter shows the link between the economic cycles and the capital market in the Republic of Croatia. Their correlation is described in the period from 2001 to 2016, in the period before and after the global financial crisis. By developing economic cycles, it can be concluded that no economy can be permanently in balance. It is known that the top and bottom are actually the maximum, or the minimum that some economy can achieve, but thereafter follows the reverse direction of movement. No expansion and no recession are constant. Every expansion is followed by recession and inversely. What is important to understand is the interconnectedness of economic cycles and the capital market in Croatia. By observing the movements of selected economic indicators such as personal consumption, investment and gross wages, and share index CROBEX, as indicator of capital market movements, it can be noticed their interrelationships. In the period of falling or recession, indicators and CROBEX are decreasing, while their growth is noticeable in the course of recovery towards expansion. Any movement on the capital market has a certain correlation with the different stages of economic cycles.