THE BUSINESS CYCLE CONCEPTUAL APPROACHES AND DEBATES PALAȘCĂ Silvia PhD Candidate PALAȘCĂ Silvia PhD Candidate

Purpose of the study emphasize business cycle theories nine hypotheses classical” business cycle, vs. „growth” cycle

Overview IntroductionBusiness cycle theoriesStandard cycle vs. ”growth” cycleConclusions

Introduction Business cycle ElusiveControversialIdeological Economic growth

Over production theory economic crisis due to lack of capital David Hume misallocation of resources and labor over-production David Ricardo opposition between production and consumption Instability of the capitalist economy Karl Marx

Demographic theory Thomas Malthus ( ) 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 Temperature induced to the harvest Harvest volume Harvest price

Clement Juglar Prosperity (5-7 years) Crisis Depression (1-3 years) Warren Persons Business cycle TrendCyclicalSeasonalRandom Wave theory

Psychological theory Arthur C. Pigou beliefs of the group "herd effect" "uncompensated errors."

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 rateBorrowing Expansion of the money supply Unsustainable credit expansion Recession

Innovation theory Joseph Schumpeter Resultants Economic growth Recession Innovation

Rational expectations theory Robert Lucas Anticipate the consequences of any change in fiscal policy Behave rationally Take advantage of new laws or regulations Weaken the purpose

Standard cycle Burns and Mitchell Enhancements 2 phases=> Markov chainsdynamic equations model Division of economic cycles into phases nine phasesturning points Aggregating specific cycles individual economic seriessimultaneous movements

Growth cycle Robert Solow Source: Christoffersen, P. (2000)

Conclusions Historic vision Politics Economics Business cycle

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