Business Cycle Theory

"Is the business cycle obsolete?" This often cited title of a book edited by Bronfenbren­ ner with the implicit affirmation of the question reflected the attitude of mainstream macroeconomics in the 1960s regarding the empirical relevance of cyclic motions of an economy. The successful income policies, theoretically grounded in Keynesian macroec­ onomics, seemed to have eased or even abolished the fluctuations in Western economies which motivated studies of many classical and neoclassical economists for more than 100 years. The reasoning behind the conviction that business cycles would increasingly be­ come irrelevant was rather simple: if an economy fluctuates for whatever reason, then it is almost always possible to neutralize these cyclic motions by means of anticyclic demand policies. From the 1950s until the mid-1960s business cycle theory had often been consid­ ered either as an appendix to growth theory or as an academic exercise in dynamical economics. The common business cycle models were essentially multiplier-accelerator models whose dependence on particular parameter values (in order to exhibit oscillatory motion) suggested a rather improbable occurrence of persistent fluctuations. The obvi­ ous success in compensating business cycles in those days prevented intensive concern with the occurrence of cycles. Rather, business cycle theory turned into stabilization theory which investigated theoretical possibilities of stabilizing a fluctuating economy. Many macroeconomic textbooks appeared in the 1960s which consequently identified business cycle theory with inquiries on the possibilities to stabilize economies by means of active fiscal or monetary policies.

Inhalt

Preface.- 1. Fluctuations in Major Economic Variables.- 1.1. Periodic Patterns and Stylized Facts.- 1.2. The Measurement of the Business Cycle.- 1.2.1. Economic Indicators.- 1.2.1.1. Harvard Barometer.- 1.2.1.2. NBER Indicators.- 1.2.1.3. Indicators in Germany.- 1.2.1.4. Diagnosis and Prognosis by Means of Indicators.- 1.2.2. Capacity Utilization.- 1.2.2.1. Concepts Based on Single Factors of Production.- 1.2.2.2. Concepts Based on Production Functions.- 1.2.2.3. Wharton School Index and Surveys.- 2. Shock-Dependent Business Cycle Theories.- 2.1. Discrete-Time Shock-Dependent Models.- 2.1.1. Linear Models of the Cycle.- 2.1.1.1. The Basic Samuelson Model.- 2.1.1.2. Hicks' Linear Accelerator.- 2.1.1.3. The Influence of Inventories.- 2.1.1.4. Monetary Aspects of the Cycle.- 2.1.2. Non-Linear Multiplier-Accelerator Models.- 2.1.2.1. Ceiling and Floor in the Hicks Model.- 2.1.2.2. The Influence of Ratchet Effects.- 2.2. Continuous-Time Shock-Dependent Models.- 2.3. The Kalecki Model and Mixed Difference-Differential Equations.- 2.4. The Relevance of Shock-Dependent Business Cycle Theories.- 3. Business Cycle Theory and Exogenous Shocks.- 3.1. The Political Business Cycle.- 3.1.1. Governmental Behavior as the Cause of Business Cycles.- 3.1.2. Implications of the Political Business Cycle.- 3.2. The Theory of Stochastic Business Cycles.- 3.2.1. Business Cycle Models with Stochastic Exogenous Influences.- 3.2.2. A Stochastic Business Cycle Model.- 3.3. The Rational Expectations Approach to Business Cycles.- 3.3.1. Expectations and Rationality in Economic Theory.- 3.3.2. The New Classical Macroeconomics.- 3.3.3. Rational Expectations Business Cycle Models.- 4. Shock-Independent Business Cycle Theorie.- 4.1. A Linear Shock-Independent Growth Cycle Model.- 4.2. Goodwin's Quasi-Non-Linear Accelerator.- 4.3. Non-Linear Theories of the Cycle.- 4.3.1. Kaldor's Non-Linear Investment and Savings Functions.- 4.3.2. The Poincaré-Bendixson Theorem and the Existence of Limit Cycles.- 4.3.2.1. Chang/Smyth's Reformulation of the Kaldor Model.- 4.3.2.2. The Non-Linear Phillips Curve and the Cycle.- 4.3.2.3. Non-Walrasian Macroeconomics and the Business Cycle.- 4.3.3. Predator-Prey Interpretations of the Business Cycle.- 4.3.4. The Liénard-van der Pol Equation.- 4.3.4.1. The Uniqueness of Limit Cycles.- 4.3.4.2. The Kaldor Model as a Liénard Equation.- 4.3.5. The Hopf Bifurcation in Business Cycle Theory.- 4.3.5.1. The Hopf Bifurcation in the Continuous-Time Case.- 4.3.5.2. The Hopf Bifurcation in the Discrete-Time Case.- 5. Complex Motion in Business Cycle Models.- 5.1. Non-Linearities and Chaotic Movements.- 5.1.1. Chaos in Discrete-Time Models.- 5.1.2. Chaos and Business Cycles.- 5.1.3. Chaos in Higher-Dimensional Systems.- 5.1.4. Numerical Techniques and the Empirical Evidence of Chaos.- 5.2. Catastrophe Theory and Business Cycle Theory.- 5.2.1. Basic Ideas of Catastrophe Theory.- 5.2.2. The Kaldor Model in the Light of Catastrophe Theory.- 5.3. Structural Instability and Business Cycle Theory - Conclusions.- References.- Name Index.