business cycles

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business cycles,

fluctuations in economic activity characterized by periods of rising and falling fiscal health. During a business cycle, an economy grows, reaches a peak, and then begins a downturn followed by a period of negative growth (a recession), that ends in a trough before the next upturn. The theory of business cycles is generally attributed to French physician Clement Juglar, who proposed in 1862 that such fluctuations were to be expected in any economic system. Other later theorists developed Juglar's theory, arriving at business cycles of anywhere from 10 years to the half-century cycle suggested by Russian economist Nikolai Kondratieff. Many attempts have been made to equalize business cycles through monetary and fiscal policy decisions. During the 1970s and 80s, for instance, U.S. fiscal policy deliberately created a recession to combat inflation. Theories on the causes of business cycles consider various possible factors; however, none has conclusively delineated the underlying causes for fluctuations. Such 20th-century theorists as John Maurice Clark and Joseph Schumpeter have attempted to find cures for economic instability, rather than describing it as simply a natural phenomenon in the manner of many 19th-century theorists. The "underconsumption" theory, for instance, claims that an inordinate amount of income goes to the wealthy rather than to investment, thus producing instability.

Bibliography

See R. J. Gordon, ed., The American Business Cycle (1986) and W. C. Mitchell, Business Cycles and Their Causes (1989); A. W. Mullineux, Business Cycles and Financial Crises (1990).

References in periodicals archive ?
Another example is the Real Business Cycle (RBC) theory, which is presented as a theory that relies on changes in productivity rather than on changes in the growth rate of productivity (with respect to the expected productivity growth), as a best version of this theory does.
The risk of job displacement is assumed to be closely associated with the business cycle.
In this phase of the business cycle, economically sensitive sectors such as industrials and technology have tended to outperform the equity market, while defensive sectors such as utilities typically have tended to underperform.
Given the financial cycle's ugly climax, governments should shift their focus from smoothing business cycles to preventing excessive debt, counsels the BIS.
Focus on peers aligned with size, industry, business model and business cycle.
It also demonstrates how to use the business cycle approach to investment decision making.
Second, in general, business cycles since the 1990s are more synchronized across countries than those in the 1980s, which support the view that financial and trade integration increases business cycle synchronization in Asia.
In managing DBIZ, we utilize both a top-down and bottom-up approach that aims to invest in attractive market sectors according to the current business cycle stage.
Friedman's early perspective on business cycle analysis is evident in his review of Jan Tinbergen's Business Cycles in the United States of America, 1919-1932.
Household balance sheets have been one factor behind these business cycle differences.
Given the large number of bankruptcies in this industry, there is reason to believe that airlines are particularly sensitive to movements in the business cycle.
Haberler (1937) is an NBER business cycle study by a neo-Austrian published pre-dispute.