Business cycle

either denied the existence of business cycles,[3] blamed

them on external factors, notably war,[4] or only studied
the long term. Sismondi found vindication in the Panic
of 1825, which was the rst unarguably international
economic crisis, occurring in peacetime.

The business cycle or economic cycle is the downward

and upward movement of gross domestic product (GDP)
around its long-term growth trend.[1] These uctuations
typically involve shifts over time between periods of relatively rapid economic growth (expansions or booms), and
periods of relative stagnation or decline (contractions or
recessions).

Sismondi and his contemporary Robert Owen, who expressed similar but less systematic thoughts in 1817 Report to the Committee of the Association for the Relief of
the Manufacturing Poor, both identied the cause of economic cycles as overproduction and underconsumption,
caused in particular by wealth inequality. They advocated
government intervention and socialism, respectively, as
the solution. This work did not generate interest among
classical economists, though underconsumption theory
developed as a heterodox branch in economics until being
systematized in Keynesian economics in the 1930s.

Used in the indenite sense, a business cycle is a period

of time containing a single boom and contraction in sequence.
Business cycles are usually measured by considering the
growth rate of real gross domestic product. Despite being
termed cycles, these uctuations in economic activity can
prove unpredictable.
A boom-and-bust cycle is one in which the expansions
are rapid and the contractions are steep and severe.

1
1.1

Sismondis theory of periodic crises was developed into

a theory of alternating cycles by Charles Dunoyer,[5] and
similar theories, showing signs of inuence by Sismondi,
were developed by Johann Karl Rodbertus. Periodic
crises in capitalism formed the basis of the theory of Karl
Marx, who further claimed that these crises were increasing in severity and, on the basis of which, he predicted
a communist revolution. He devoted hundreds of pages
of Das Kapital (1867) to crises. In Progress and Poverty
(1879), Henry George focused on land's role in crises
particularly land speculation and proposed a single tax
on land as a solution.

History
Theory

1.2 Classication by periods

Parts of a business cycle

Actual business cycle

Business cycle with it specic forces in four stages according to
Malcolm C. Rorty, 1922

The rst systematic exposition of periodic economic

crises, in opposition to the existing theory of economic
equilibrium, was the 1819 Nouveaux Principes
d'conomie politique by Jean Charles Lonard de
Sismondi. [2] Prior to that point classical economics had

In 1860 French economist Clement Juglar rst identied

economic cycles 7 to 11 years long, although he cautiously
did not claim any rigid regularity.[6] Later, economist
1

HISTORY

Joseph Schumpeter (18831950) argued that a Juglar Cycle has four stages:

from 1870 to 1890 that included the Long Depression

and two other recessions.[11][12] There were also significant increases in productivity in the years leading up
1. expansion (increase in production and prices, low to the Great Depression. Both the Long and Great Depressions were characterized by overcapacity and market
interest-rates)
saturation.[13][14]
2. crisis (stock exchanges crash and multiple bankruptOver the period since the Industrial Revolution, technocies of rms occur)
logical progress has had a much larger eect on the econ3. recession (drops in prices and in output, high omy than any uctuations in credit or debt, the primary
exception being the Great Depression, which caused a
interest-rates)
multi-year steep economic decline. The eect of tech4. recovery (stocks recover because of the fall in prices nological progress can be seen by the purchasing power
and incomes)
of an average hours work, which has grown from $3 in
1900 to $22 in 1990, measured in 2010 dollars.[15] There
Schumpeters Juglar model associates recovery and pros- were similar increases in real wages during the 19th cenperity with increases in productivity, consumer con- tury. See: Productivity improving technologies (historical) A table of innovations and long cycles can be seen at:
dence, aggregate demand, and prices.
Kondratiev wave#Modern modications of Kondratiev
In the mid-20th century, Schumpeter and others protheory
posed a typology of business cycles according to their
periodicity, so that a number of particular cycles were There were frequent crises in Europe and America in the
19th and rst half of the 20th century, specically the
named after their discoverers or proposers:[7]
period 18151939. This period started from the end of
the Kitchin inventory cycle of 3 to 5 years (after the Napoleonic wars in 1815, which was immediately followed by the Post-Napoleonic depression in the United
Joseph Kitchin);[8]
Kingdom (181530), and culminated in the Great De the Juglar xed-investment cycle of 7 to 11 years pression of 192939, which led into World War II. See
(often identied as the business cycle)
Financial crisis: 19th century for listing and details. The
rst of these crises not associated with a war was the
the Kuznets infrastructural investment cycle of 15 to Panic of 1825.
25 years (after Simon Kuznets also called buildBusiness cycles in OECD countries after World War II
ing cycle)
were generally more restrained than the earlier business
the Kondratiev wave or long technological cycle of cycles. This was particularly true during the Golden
45 to 60 years (after the Soviet economist Nikolai Age of Capitalism (1945/501970s), and the period
Kondratiev).[9]
19452008 did not experience a global downturn until the Late-2000s recession.[16] Economic stabilization
Interest in the dierent typologies of cycles has waned policy using scal policy and monetary policy appeared
since the development of modern macroeconomics, to have dampened the worst excesses of business cywhich gives little support to the idea of regular periodic cles, and automatic stabilization due to the aspects of the
government's budget also helped mitigate the cycle even
cycles.[10]
without conscious action by policy-makers.

1.3

Occurrence
steam engine
cotton

railway
steel

electrical
engineering
chemistry

petrochemicals
automobiles

information
technology

P R D E
1. Kondratiev
1800

2. Kondratiev
1850

3. Kondratiev
1900

4. Kondratiev
1950

5. Kon...
1990

P: prosperity
R: recession
D: depression
E: improvement

A simplied Kondratiev wave, with the theory that productivity

enhancing innovations drive waves of economic growth.

In this period, the economic cycle at least the problem

of depressions was twice declared dead. The rst declaration was in the late 1960s, when the Phillips curve was
seen as being able to steer the economy. However, this
was followed by stagation in the 1970s, which discredited the theory. The second declaration was in the early
2000s, following the stability and growth in the 1980s and
1990s in what came to be known as The Great Moderation. Notably, in 2003, Robert Lucas, in his presidential
address to the American Economic Association, declared
that the central problem of depression-prevention [has]
been solved, for all practical purposes.[17] Unfortunately,
this was followed by the 20082012 global recession.

Various regions have experienced prolonged depressions,

most dramatically the economic crisis in former Eastern
There were great increases in productivity, industrial proBloc countries following the end of the Soviet Union in
duction and real per capita product throughout period

2.1

Upper turning points of business cycle, commodity prices and freight rates

1991. For several of these countries the period 1989

2010 has been an ongoing depression, with real income
still lower than in 1989. This has been attributed not to
a cyclical pattern, but to a mismanaged transition from
command economies to market economies.

Identifying

Economic activity in the US, 19542005.

not divisible into shorter cycles of similar characteristics with amplitudes approximating their
own.
According to A. F. Burns:[19]

Business cycles are not merely uctuations

in aggregate economic activity. The critical
feature that distinguishes them from the commercial convulsions of earlier centuries or from
the seasonal and other short term variations of
our own age is that the uctuations are widely
diused over the economy its industry, its
commercial dealings, and its tangles of nance.
The economy of the western world is a system
of closely interrelated parts. He who would understand business cycles must master the workings of an economic system organized largely
in a network of free enterprises searching for
prot. The problem of how business cycles
come about is therefore inseparable from the
problem of how a capitalist economy functions.
In the United States, it is generally accepted that the
National Bureau of Economic Research (NBER) is the
nal arbiter of the dates of the peaks and troughs of the
business cycle. An expansion is the period from a trough
to a peak, and a recession as the period from a peak to
a trough. The NBER identies a recession as a signicant decline in economic activity spread across the
economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial
production.[20]

2.1 Upper turning points of business cycle,

commodity prices and freight rates
There is often a close timing relationship between the
upper turning points of the business cycle, commodity
prices and freight rates, which is shown to be particularly
In 1946, economists Arthur F. Burns and Wesley C. tight in the grand peak years of 1873, 1889, 1900 and
Mitchell provided the now standard denition of business 1912.[21]
cycles in their book Measuring Business Cycles:[18]
Deviations from the long-term US growth trend, 19542005.

Business cycles are a type of uctuation

found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions
occurring at about the same time in many economic activities, followed by similarly general
recessions, contractions, and revivals which
merge into the expansion phase of the next cycle; in duration, business cycles vary from more
than one year to ten or twelve years; they are

2.2 Spectral analysis of business cycles

Recent research employing spectral analysis has conrmed the presence of Kondratiev waves in the world
GDP dynamics at an acceptable level of statistical
signicance.[22] Korotayev & Tsirel also detected shorter
business cycles, dating the Kuznets to about 17 years and
calling it the third sub-harmonic of the Kondratiev, meaning that there are three Kuznets cycles per Kondratiev.

2.3

3 PROPOSED EXPLANATIONS

Cycles or uctuations?

for government policy to mitigate the damage of economic cycles, despite believing in external causes, while
In recent years economic theory has moved towards the Austrian School economists argue against government instudy of economic uctuation rather than a 'business volvement as only worsening crises, despite believing in
cycle'[23] though some economists use the phrase 'busi- internal causes.
ness cycle' as a convenient shorthand. For Milton Fried- The view of the economic cycle as caused exogenously
man calling the business cycle a cycle is a misnomer, dates to Says law, and much debate on endogeneity or
because of its non-cyclical nature. Friedman believed exogeneity of causes of the economic cycle is framed in
that for the most part, excluding very large supply shocks, terms of refuting or supporting Says law; this is also rebusiness declines are more of a monetary phenomenon. ferred to as the "general glut" debate.

Proposed explanations

The explanation of uctuations in aggregate economic activity is one of the primary concerns of macroeconomics.
The main framework for explaining such uctuations is
Keynesian economics. In the Keynesian view, business
cycles reect the possibility that the economy may reach
short-run equilibrium at levels below or above full employment. If the economy is operating with less than full
employment, i.e., with high unemployment, Keynesian
theory states that monetary policy and scal policy can
have a positive role to play in smoothing the uctuations
of the business cycle.

Until the Keynesian revolution in mainstream economics

in the wake of the Great Depression, classical and neoclassical explanations (exogenous causes) were the mainstream explanation of economic cycles; following the
Keynesian revolution, neoclassical macroeconomics was
largely rejected. There has been some resurgence of neoclassical approaches in the form of real business cycle
(RBC) theory. The debate between Keynesians and neoclassical advocates was reawakened following the recession of 2007.

Mainstream economists working in the neoclassical tradition, as opposed to the Keynesian tradition, have usually
viewed the departures of the harmonic working of the
market economy as due to exogenous inuences, such as
the State or its regulations, labor unions, business monopThere are a number of alternative heterodox economic olies, or shocks due to technology or natural causes.
theories of business cycles, largely associated with parContrarily, in the heterodox tradition of Jean Charles
ticular schools or theorists. There are also some divisions
Lonard de Sismondi, Clement Juglar, and Marx the reand alternative theories within mainstream economics,
current upturns and downturns of the market system are
notably real business cycle theory and credit-based explaan endogenous characteristic of it.[24]
nations such as debt deation and the nancial instability
The 19th-century school of underconsumptionism also
hypothesis.
posited endogenous causes for the business cycle, notably
the paradox of thrift, and today this previously heterodox school has entered the mainstream in the form of
3.1 Exogenous vs. endogenous
Keynesian economics via the Keynesian revolution.
Within mainstream economics, the debate over external (exogenous) versus internal (endogenous) being the
causes of the economic cycles, with the classical school 3.2 Keynesian
(now neo-classical) arguing for exogenous causes and
the underconsumptionist (now Keynesian) school argu- According to Keynesian economics, uctuations in
ing for endogenous causes. These may also broadly be aggregate demand cause the economy to come to short
classed as supply-side and demand-side explanations: run equilibrium at levels that are dierent from the full
supply-side explanations may be styled, following Says employment rate of output. These uctuations express
law, as arguing that "supply creates its own demand", themselves as the observed business cycles. Keynesian
while demand-side explanations argue that eective de- models do not necessarily imply periodic business cycles.
mand may fall short of supply, yielding a recession or de- However, simple Keynesian models involving the interacpression.
tion of the Keynesian multiplier and accelerator give rise
to initial shocks. Paul Samuelson's
This debate has important policy consequences: propo- to cyclical responses
[25]
is supposed to account for business
oscillator
model
nents of exogenous causes of crises such as neoclassicals
cycles
thanks
to
the
multiplier
and the accelerator. The
largely argue for minimal government policy or regulaamplitude
of
the
variations
in
economic
output depends
tion (laissez faire), as absent these external shocks, the
on
the
level
of
the
investment,
for
investment
determines
market functions, while proponents of endogenous causes
the
level
of
aggregate
output
(multiplier),
and
is deterof crises such as Keynesians largely argue for larger govmined
by
aggregate
demand
(accelerator).
ernment policy and regulation, as absent regulation, the
market will move from crisis to crisis. This division In the Keynesian tradition, Richard Goodwin[26] accounts
is not absolute some classicals (including Say) argued for cycles in output by the distribution of income between

3.5

Politically based business cycle

business prots and workers wages. The uctuations in

wages are almost the same as in the level of employment
(wage cycle lags one period behind the employment cycle), for when the economy is at high employment, workers are able to demand rises in wages, whereas in periods
of high unemployment, wages tend to fall. According to
Goodwin, when unemployment and business prots rise,
the output rises.

3.3

Credit/debt cycle

Main articles: Credit cycle and Debt deation

One alternative theory is that the primary cause of economic cycles is due to the credit cycle: the net expansion
of credit (increase in private credit, equivalently debt, as
a percentage of GDP) yields economic expansions, while
the net contraction causes recessions, and if it persists, depressions. In particular, the bursting of speculative bubbles is seen as the proximate cause of depressions, and
this theory places nance and banks at the center of the
business cycle.

5
Within mainstream economics, Keynesian views have
been challenged by real business cycle models in which
uctuations are due to technology shocks. This theory
is most associated with Finn E. Kydland and Edward C.
Prescott, and more generally the Chicago school of economics (freshwater economics). They consider that economic crisis and uctuations cannot stem from a monetary shock, only from an external shock, such as an innovation.
RBC theory has been categorically rejected by a number of mainstream economists in the Keynesian tradition,
such as (Summers 1986) and Paul Krugman.

3.5 Politically based business cycle

Another set of models tries to derive the business cycle

from political decisions. The partisan business cycle suggests that cycles result from the successive elections of
administrations with dierent policy regimes. Regime A
adopts expansionary policies, resulting in growth and ination, but is voted out of oce when ination becomes
unacceptably high. The replacement, Regime B, adopts
contractionary policies reducing ination and growth, and
A primary theory in this vein is the debt deation theory
the downwards swing of the cycle. It is voted out of oce
of Irving Fisher, which he proposed to explain the Great
when unemployment is too high, being replaced by Party
Depression. A more recent complementary theory is the
A.
Financial Instability Hypothesis of Hyman Minsky, and
the credit theory of economic cycles is often associated The political business cycle is an alternative theory stating that when an administration of any hue is elected, it
with Post-Keynesian economics such as Steve Keen.
initially adopts a contractionary policy to reduce ination
Post-Keynesian economist Hyman Minsky has proposed
and gain a reputation for economic competence. It then
an explanation of cycles founded on uctuations in credit,
adopts an expansionary policy in the lead up to the next
interest rates and nancial frailty, called the Financial
election, hoping to achieve simultaneously low ination
Instability Hypothesis. In an expansion period, interest
and unemployment on election day.[28]
rates are low and companies easily borrow money from
banks to invest. Banks are not reluctant to grant them The political business cycle theory is strongly linked to
loans, because expanding economic activity allows busi- the name of Micha Kalecki who discussed the relucness increasing cash ows and therefore they will be able tance of the 'captains of industry' to accept government
to easily pay back the loans. This process leads to rms intervention in the matter of employment.[29] Persistent
becoming excessively indebted, so that they stop invest- full employment would mean increasing workers bargaining power to raise wages and to avoid doing unpaid
ing, and the economy goes into recession.
labor, potentially hurting protability. (He did not see
While credit causes have not been a primary theory of the
this theory as applying under fascism, which would use
economic cycle within the mainstream, they have gained
direct force to destroy labors power.) In recent years,
occasional mention, such as (Eckstein & Sinai 1986),
proponents of the electoral business cycle theory have
cited approvingly by (Summers 1986).
argued that incumbent politicians encourage prosperity
Carlota Perez blames nancial capital for excess spec- before elections in order to ensure re-election and make
ulation, which she claims is likely to occur in the frenzy the citizens pay for it with recessions afterwards.
stage of a new technology, such as the 19982000 computer, internet, dot.com mania and bust. Perez also says
excess speculation is likely to occur in the mature phase 3.6 Marxian economics
of a technological age.[27]
For Marx the economy based on production of commodities to be sold in the market is intrinsically prone to crisis.
3.4 Real business cycle theory
In the heterodox Marxian view prot is the major engine
of the market economy, but business (capital) protabilMain article: Real Business Cycle theory
ity has a tendency to fall that recurrently creates crises,
in which mass unemployment occurs, businesses fail, re-

3 PROPOSED EXPLANATIONS

maining capital is centralized and concentrated and prof- prompted by government and bankers eorts to expand
itability is recovered. In the long run these crises tend to credit despite restraints imposed by the prevailing gold
be more severe and the system will eventually fail.[30]
standard, and are thus consistent with Austrian Business
[40][41]
Some Marxist authors such as Rosa Luxemburg viewed Cycle Theory.
the lack of purchasing power of workers as a cause of
a tendency of supply to be larger than demand, creating
crisis, in a model that has similarities with the Keynesian one. Indeed, a number of modern authors have tried
to combine Marxs and Keyness views. Henryk Grossman[31] reviewed the debates and the counteracting tendencies and Paul Mattick subsequently emphasized the
basic dierences between the Marxian and the Keynesian perspective: while Keynes saw capitalism as a system
worth maintaining and susceptible to ecient regulation,
Marx viewed capitalism as a historically doomed system
that cannot be put under societal control.[32]
The American mathematician and economist, Richard
M. Goodwin formalised a Marxist model of business cycles, known as the Goodwin Model in which recession
was caused by increased bargaining power of workers
(a result of high employment in boom periods) pushing up the wage share of national income, suppressing
prots and leading to a breakdown in capital accumulation. Later theorists applying variants of the Goodwin
model have identied both short and long period protled growth and distribution cycles in the United States,
and elsewhere.[33][34][35][36][37] David Gordon provided a
Marxist model of long period institutional growth cycles,
in an attempt to explain the Kondratiev wave. This cycle
is due to the periodic breakdown of the 'social structure
of accumulation' a set of institutions which secure and
stabilise capital accumulation.

The Austrian explanation of the business cycle diers signicantly from the mainstream understanding of business cycles and is generally rejected by mainstream
economists. Mainstream economists generally do not
support Austrian school explanations for business cycles, on both theoretical as well as real-world empirical
grounds.[42][43][44][45][46][47]

3.8 Yield curve

The slope of the yield curve is one of the most powerful predictors of future economic growth, ination,
and recessions.[48] One measure of the yield curve slope
(i.e. the dierence between 10-year Treasury bond rate
and the 3-month Treasury bond rate) is included in the
Financial Stress Index published by the St. Louis Fed.
A dierent measure of the slope (i.e. the dierence between 10-year Treasury bond rates and the federal funds
rate) is incorporated into the Index of Leading Economic
Indicators.

An inverted yield curve is often a harbinger of recession.

A positively sloped yield curve is often a harbinger of
inationary growth. Work by Dr. Arturo Estrella & Dr.
Tobias Adrian has established the predictive power of an
inverted yield curve to signal a recession. Their models
show that when the dierence between short-term interest rates (he uses 3-month T-bills) and long-term inter3.7 Austrian School
est rates (10-year Treasury bonds) at the end of a fedMain article: Austrian business cycle theory
eral reserve tightening cycle is negative or less than 93
basis points positive that a rise in unemployment usually
occurs.[49] The New York Fed publishes a monthly recesEconomists of the Austrian School argue that business cycles are caused by excessive issuance of credit by banks sion probability prediction derived from the yield curve
and based on Dr. Estrellas work.
in fractional reserve banking systems. According to Austrian economists, excessive issuance of bank credit may All the recessions in the US since 1970 (up through 2015)
be exacerbated if central bank monetary policy sets inter- have been preceded by an inverted yield curve (10-year
est rates too low, and the resulting expansion of the money vs 3-month). Over the same time frame, every occursupply causes a boom in which resources are misallo- rence of an inverted yield curve has been followed by recated or malinvested because of articially low inter- cession as declared by the NBER business cycle dating
est rates. Eventually, the boom cannot be sustained and committee.[50]
is followed by a bust in which the malinvestments are Dr. Estrella has postulated that the yield curve aects the
liquidated (sold for less than their original cost) and the business cycle via the balance sheet of banks.[51] When
money supply contracts.[38][39]
the yield curve is inverted banks are often caught payOne of the criticisms of the Austrian business cycle theory is based on the observation that the United States
suered recurrent economic crises in the 19th century,
notably the Panic of 1873, which occurred prior to the
establishment of a U.S. central bank in 1913. Adherents of the Austrian School, such as the historian Thomas
Woods, argue that these earlier nancial crises were

ing more on short-term deposits than they are making on

long-term loans leading to a loss of protability and reluctance to lend resulting in a credit crunch. When the
yield curve is upward sloping, banks can protably takein short term deposits and make long-term loans so they
are eager to supply credit to borrowers. This eventually
leads to a credit bubble.

3.9

Georgism

lution, most governments of developed nations have seen

the mitigation of the business cycle as part of the responHenry George claimed land price uctuations were the sibility of government, under the rubric of stabilization
primary cause of most business cycles.[52] The theory is policy.
generally ignored in most of todays discussions of the Since in the Keynesian view, recessions are caused by insubject[53] despite two of the greatest economic contrac- adequate aggregate demand, when a recession occurs the
tions of the last 100 years (19291933 and 20082009) government should increase the amount of aggregate deinvolving speculative real estate bubbles.
mand and bring the economy back into equilibrium. This
George observed that one necessary factor in production
land has an inherent tendency to rise in price on an
exponential basis as the economy grows. The reason for
this is that the quantity of land (the stock of locations and
natural resources) is xed, while its quality is improved
due to improvements such as transportation infrastructures and economic development of the surroundings. Investors see this tendency as the economy grows and they
buy land ahead of the boom areas, withholding it from
use in order to take advantage of its increased value in
the future. Because housing and commercial real estate
provide collateral for a large portion of lending, there is a
tendency for real estate prices to rise faster than the rate of
ination in business cycle upswings. Speculation in land
concentrates prots in landholders and diverts economic
resources to speculation in land, squeezing prots away
from production that has to occur on this land.
In eect, land speculation creates a built-in supply shock,
that squeezes the economy just as economic output increases. This is a systemic retardation of the economy,
placing a sharp brake on further economic expansion.
This shock to the economy occurs as long as there is
land speculation, creating an underlying tendency toward
ination and recession late in the growth phase of the
business cycle. Land speculation, according to George,
is always the cause of economic downturns. There are
any number of contributing causes; things like oil price
shocks, consumer condence crises, international trade
uctuations, natural disasters but none of these things
creates the underlying weakness.
Land speculation slows the economy in two ways. It increases production costs by making land in general more
expensive (shifting the Aggregate supply (AS) curve upward) as well as decreasing productivity by denying access to the best locations, shifting the AS curve to the left
and lowering potential output.[54]

the government can do in two ways, rstly by increasing the money supply (expansionary monetary policy) and
secondly by increasing government spending or cutting
taxes (expansionary scal policy).
By contrast, some economists, notably New classical
economist Robert Lucas, argue that the welfare cost of
business cycles are very small to negligible, and that governments should focus on long-term growth instead of stabilization.
However, even according to Keynesian theory, managing
economic policy to smooth out the cycle is a dicult task
in a society with a complex economy. Some theorists,
notably those who believe in Marxian economics, believe
that this diculty is insurmountable. Karl Marx claimed
that recurrent business cycle crises were an inevitable result of the operations of the capitalistic system. In this
view, all that the government can do is to change the timing of economic crises. The crisis could also show up
in a dierent form, for example as severe ination or a
steadily increasing government decit. Worse, by delaying a crisis, government policy is seen as making it more
dramatic and thus more painful.
Additionally, since the 1960s neoclassical economists
have played down the ability of Keynesian policies to
manage an economy. Since the 1960s, economists like
Nobel Laureates Milton Friedman and Edmund Phelps
have made ground in their arguments that inationary expectations negate the Phillips curve in the long run. The
stagation of the 1970s provided striking support for their
theories, defying the simple Keynesian prediction that recessions and ination cannot occur together. Friedman
has gone so far as to argue that all the central bank of a
country should do is to avoid making large mistakes, as
he believes they did by contracting the money supply very
rapidly in the face of the Wall Street Crash of 1929, in
which they made what would have been a recession into
the Great Depression.

Mitigating an economic down5 See also

turn

Many social indicators, such as mental health, crimes,

and suicides, worsen during economic recessions (though
general mortality tends to fall, and it is in expansions when
it tends to increase).[55] As periods of economic stagnation are painful for the many who lose their jobs, there
is often political pressure for governments to mitigate recessions. Since the 1940s, following the Keynesian revo-

Dynamic stochastic general equilibrium

Information revolution
Inventory investment over the business cycle
List of commodity booms
List of nancial crises in the United States

6 NOTES
Market trend

[15] Lebergott, Stanley (1993). Pursuing Happiness: American Consumers in the Twentieth Century. Princeton, NJ:
Princeton University Press. pp. a:Adapted from Fig. 9.1.
ISBN 0-691-04322-1.

Skyscraper Index
Welfare cost of business cycles

[16] http://www.ici.org/pdf/per02-02.pdf Stock Market Cycles 19421995

World-systems theory

[17] Fighting O Depression, New York Times, http://www.

nytimes.com/2009/01/05/opinion/05krugman.html

Notes

[1] Madhani, P. M. (2010). Rebalancing Fixed and Variable

Pay in a Sales Organization: A Business Cycle Perspective. Compensation & Benets Review 42 (3): 179189.
doi:10.1177/0886368709359668.
[2] Over Production and Under Consumption, ScarLett,
History Of Economic Theory and Thought
[3] Batra, R. (2002). Economics in Crisis: Severe and Logical Contradictions of Classical, Keynesian, and Popular
Trade Models.
[4] http://www.thefreemanonline.org/featured/
classical-economists-good-or-bad/
[5] Benkemoune, Rabah (2009). Charles Dunoyer and
the Emergence of the Idea of an Economic Cycle. History of Political Economy 41 (2): 271295.
doi:10.1215/00182702-2009-003.
[6] M. W. Lee, Economic uctuations.
Richard D. Irwin, 1955

Homewood, IL,

[7] Schumpeter, J. A. (1954). History of Economic Analysis.

London: George Allen & Unwin.
[8] Kitchin, Joseph (1923). Cycles and Trends in Economic
Factors. Review of Economics and Statistics (The MIT
Press) 5 (1): 1016. doi:10.2307/1927031. JSTOR
1927031.
[9] Kondratie, N. D.; Stolper, W. F. (1935). The
Long Waves in Economic Life.
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7 References

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Christopher J. Erceg. monetary business cycle
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OCLC 237794267.
Summers, Lawrence H. (1986). Some Skeptical Observations on Real Business Cycle Theory
(PDF). Federal Reserve Bank of Minneapolis Quarterly Review 10 (Fall): 2327.

10

External links
The Conference Board Business Cycle Indicators
Indicators of Euro Area, United States, Japan, China
and so on.
Historical documents relating to past business cycles, including charts, data publications, speeches,
and analyses

EXTERNAL LINKS

11

Text and image sources, contributors, and licenses

9.1

Text

Business cycle Source: https://en.wikipedia.org/wiki/Business_cycle?oldid=703121243 Contributors: SimonP, Edward, Michael Hardy,

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9.2

Images

File:Business_cycle.jpg Source: https://upload.wikimedia.org/wikipedia/commons/a/a2/Business_cycle.jpg License: CC BY-SA 3.0

Contributors: Own work Original artist: Azitony
File:Businesscycle_figure1.jpg Source: https://upload.wikimedia.org/wikipedia/en/c/ca/Businesscycle_figure1.jpg License: PD Contributors:
Own work
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Contributors: File:Konjunkturverlauf.svg Original artist: User:Bernard Ladenthin
File:Emblem-money.svg Source: https://upload.wikimedia.org/wikipedia/commons/f/f3/Emblem-money.svg License: GPL Contributors: http://www.gnome-look.org/content/show.php/GNOME-colors?content=82562 Original artist: perfectska04
File:Kondratieff_Wave.svg Source: https://upload.wikimedia.org/wikipedia/commons/c/c4/Kondratieff_Wave.svg License: CC BY-SA
3.0 Contributors: Own work Original artist: Rursus
File:The_Forces_of_the_Business_Cycle,_1922.jpg Source: https://upload.wikimedia.org/wikipedia/commons/c/c2/The_Forces_of_
the_Business_Cycle%2C_1922.jpg License: Public domain Contributors: Some problems in current economics. AW Shaw Company,
1922. Original artist: Rorty, Malcolm Churchill.
File:World_Business_Cycle.png Source: https://upload.wikimedia.org/wikipedia/commons/a/a0/World_Business_Cycle.png License:
CC BY-SA 4.0 Contributors: Own work, data from World Development Indicators by World Bank http://databank.worldbank.org Original
artist: Id4abel

12

9 TEXT AND IMAGE SOURCES, CONTRIBUTORS, AND LICENSES

9.3

Content license

Creative Commons Attribution-Share Alike 3.0