THE BUSINESS CYCLE
CONCEPTUAL APPROACHES AND DEBATES
PALAȘCĂ Silvia
PhD Candidate
Purpose of the study
nine
hypotheses
emphasize
business
cycle
theories
classical”
business
cycle, vs.
„growth”
cycle
Overview
Introduction
Business cycle theories
Standard cycle vs. ”growth” cycle
Conclusions
Introduction
Elusive
Economic
growth
Business
cycle
Ideological
Controversial
Over production theory
David
Hume
• economic crisis due to lack of capital
David
Ricardo
• misallocation of resources and labor
• over-production
Karl
Marx
• opposition between production and consumption
• Instability of the capitalist economy
Demographic theory
Thomas Malthus (1766-1834)
Human
growth is
exponential
The
environment
has a limit
Human
species aims
for
subsistence
Climatic and agricultural theory
Stanley Jevons
Phases of
the solar
cycle
Harvest
volume
Temperature
induced to
the harvest
Harvest price
Wave theory
Warren Persons
Clement Juglar
Trend
Prosperity
(5-7 years)
Random
Depression
(1-3 years)
Business
cycle
Crisis
Seasonal
Cyclical
Psychological theory
Arthur C. Pigou
beliefs
of the
group
"uncompensated
errors."
"herd
effect"
Monetary theories
Economic fluctuations =>
major cycles of prosperity or depression
The interest rate
Quantity of money in circulation
Austrian School
Ludwig von Mises &Friedrich von Hayek
Low interest rate
Borrowing
Expansion of the money
supply
Unsustainable credit
expansion
Recession
Innovation theory
Joseph Schumpeter
Innovation
Resultants
Recession
Economic
growth
Rational expectations theory
Robert Lucas
Anticipate the
consequences
of any change
in fiscal policy
Take
advantage of
new laws or
regulations
Behave
rationally
Weaken the
purpose
Standard cycle
Burns and Mitchell
Aggregating specific cycles
individual economic series
simultaneous movements
Division of economic cycles into phases
nine phases
turning points
Enhancements
2 phases=> Markov chains
dynamic equations model
Growth cycle
Robert Solow
Source: Christoffersen, P. (2000)
Conclusions
Historic
vision
Politics
Economics
Business
cycle
Thank you for your
attention!