
Abstract
The paper reports the principal findings of a long term research project on the description and explanation of business cycles. The research strongly confirmed the older view that business cycles have large systematic components that take the form of investment cycles. These quasi-periodic movements can be represented as low order, stochastic, dynamic processes with complex eigenvalues. Specifically, there is a fixed investment cycle of about 8 years and an inventory cycle of about 4 years. Maximum entropy spectral analysis was employed for the description of the cycles and continuous time econometrics for the explanatory models. The central explanatory mechanism is the second order accelerator, which incorporates adjustment costs both in relation to the capital stock and the rate of investment. By means of parametric resonance it was possible to show, both theoretically and empirically how cycles aggregate from the micro to the macro level. The same mathematical tool was also used to explain the international convergence of cycles. I argue that the theory of investment cycles was abandoned for ideological, not for evidential reasons. Methodological issues are also discussed.
Item Type: | Paper |
---|---|
Keywords: | business cycle; continuous time econometrics; investment cycle; inventory cycle; maximum entropy spectral analysis; parametric resonance |
Faculties: | Economics Economics > Munich Discussion Papers in Economics Economics > Chairs > Seminar for Mathematical Economics (closed) |
Subjects: | 300 Social sciences > 300 Social sciences, sociology and anthropology 300 Social sciences > 330 Economics |
JEL Classification: | E22, E32, C32, C50 |
URN: | urn:nbn:de:bvb:19-epub-694-0 |
Language: | English |
Item ID: | 694 |
Date Deposited: | 03. Oct 2005 |
Last Modified: | 08. Nov 2020, 11:11 |