Endogenous business cycles and Harrodian instability in an agent-based model

The article presents an original stock-flow consistent macroeconomic agent-based model with the aim to reexamine Harrod’s instability principle as an explanatory element of macroeconomic dynamics. The main findings are that bottom-up economic models can be subject to Harrodian instability and can produce endogenous cycles without introducing innovation waves, monetary wage spirals, or financial instability. Upward instability is stopped by the ceiling of full employment, and downward instability can be tamed by introducing an autonomous expenditure that feeds aggregate demand.     

The microfoundations of the microfoundations of Austrian Business Cycle Theory

The Review of Austrian Economics - The Austrian School interpretation of the Keynes-Hayek debate runs counter to the conventional wisdom that Hayek “lost” the debate. Austrians maintain...     

The dynamics of entrepreneurship: hysteresis, business cycles and government policy

This article estimates two unobserved components models to explore the macrodynamics of entrepreneurship in Spain and the USA. We ask whether entrepreneurship exhibits hysteresis, defined as a macrodynamic structure in which the cyclical component of entrepreneurship has persistent effects on the natural rate of entrepreneurship. We find evidence of hysteresis in Spain, but not the USA, while in Spain business cycle output variations significantly affect future rates of entrepreneurship. The article discusses implications of the findings for the design of entrepreneurship policies.     

Discoveries, innovations, and business cycles

There is considerable evidence that the density of basic innovations is peaked at definite periods with intervals of about 40–60 years. This has been used as support for the behavior of economic cycles as postulated by Kontradieff and amplified by Schumpeter. Recently some economists have used this model to forecast economic recovery in the middle or late 1980s.This paper points out that the shape of the clusters of innovation or inventions are different and sharper than those of economic depression or economic recovery. The transfer of knowledge from basic inventions to industrial innovations shortens as one moves from the 18th to the 20th century, and some probable explanations for this are offered. The importance of discoveries and limited discoveries to the process of invention and innovation is discussed. Also shown is that discoveries reveal cluster phenomena which are functionally related to the clusters of invention and innovation.     

Managing TFT-LCDs under uncertainty: When crystal cycles meet business cycles

Understanding the correlation between the crystal cycle and the business cycle is important, because it can help managers to anticipate change, reduce environmental uncertainty, and formulate operational objectives. To this end, we focused on China and the U.S. in our analysis. We found that the economic indicators that were the most relevant in the characterization of China's huge and burgeoning TFT-LCD market are gross domestic production and industrial production. We complemented this finding by conducting similar analyses in the U.S. market using a more comprehensive list of economic indicators.     

Asymmetric information, financial intermediation, and business cycles

Summary. This incorporates a debt contracting problem with asymmetric information into a standard monetary business cycle model. The model incorporates a limited participation assumption in order to induce a liquidity effect of monetary shocks and propagate monetary disturbances. The model economy shows that a positive money supply shock generates a decrease in nominal interest rates and an increase in output level. Asymmetric information amplifies the response of capital to the money supply shock, but does not propagate them in other ways. When the monetary shock is an innovation in reserve requirements, it induces a persistent response of the economy. Received: March 20, 1998; revised version: 1 April 1998     

Consumption,wealth and business cycles in Germany

This paper studies the long-run relationship between consumption, asset wealth and income—the consumption–wealth ratio—based on German data from 1980 to 2003. We find that departures from this long-run relationship mainly predict adjustments in income. The German consumption–wealth ratio also contains considerable forecasting power for a range of business cycle indicators, including the unemployment rate. This finding is in contrast to earlier studies for some of the Anglo-Saxon economies that have shown that the consumption–wealth ratio reverts to its long-run mean mainly through subsequent adjustments in asset prices. While the German consumption wealth ratio contains little information about future changes in German asset prices, we report that the U.S. consumption–wealth ratio has considerable forecasting power for the German stock market. One explanation of these findings is that in Germany—due to structural differences in the financial and pension systems—the share of publicly traded equity in aggregate household wealth is much smaller than in the Anglo-Saxon countries. We discuss the implications of our results for the measurement of a potential wealth effect on consumption. The views expressed in this paper are those of the authors and do not reflect the position of the Deutsche Bundesbank. We gratefully acknowledge comments and suggestions from an anonymous referee as well as from Heinz Herrmann, Helmut Lütkepohl, the editor, Baldev Raj, Burkhard Raunig, Monika Schnitzer, Harald Uhlig and Christian Upper. We also benefitted from comments by seminar participants at the ECB, the Deutsche Bundesbank, the CESifo Macro, Money and International Finance Area Conference 2005, the EEA 2005 annual congress and at the 2005 IAEA Meetings. Last but not least, we would like to thank Mark Weth for very useful information concerning the construction of the financial wealth data. Hoffmann’s work on this paper is also part of the project The International Allocation of Risk funded by Deutsche Forschungsgemeinschaft in the framework of SFB 475. Responsibility for any remaining errors and shortcomings is entirely our own.     

Graphical causal models and VARs: an empirical assessment of the real business cycles hypothesis

This paper assesses the empirical plausibility of the real business cycle view that shocks to real variables are the dominant sources of economic fluctuations and that monetary policy shocks play an insignificant role in determining the behavior of real variables. I reconsider the vector autoregressive model of King et al. (Am Econ Rev 81:819–840, 1991), but propose an alternative identification method, based on graphical causal models. This method selects the contemporaneous causal structure using the information incorporated in the partial correlations among the residuals. The residuals orthogonalization which follows and the study of the impulse response functions confirm the results of King et al. (Am Econ Rev 81:819–840, 1991): permanent productivity shocks are not the dominant sources of aggregate fluctuations in US economy. I would like to thank Peter Spirtes, Marco Lippi, and Clark Glymour for helpful comments on early versions of the paper. I am also grateful to Valentina Corradi for providing me with an updated version of the King et al. (1991) data set. The usual disclaimer applies.     

企业生态系统的动态演化机制

本文将生命周期理论引入企业生态系统的动态演化规律分析,指出其演化过程经历开拓、成长、成熟、自我更新或衰退大致四个阶段.基于耗散结构理论,时企业生态系统的动态演化机制进行了研究.得出其演化是自组织和环境选择相结合的结果.文章深刻揭示了企业生态系统的动态演化规律,为促进企业生态系统的健康发展和企业组织与战略管理的创新提供了启迪.     

Lumpy consumer durables, market power, and endogenous business cycles

Abstract.  In this paper we show that lumpy consumer durables and market power can generate endogenous cycles consistent with the facts. Past sales determine the current market size of durable goods. Larger past sales, ceteris paribus, thus naturally result in a smaller current market size and income. In this manner, the seeds of a downturn are sown in an upturn. JEL Classification: E32, E13     

International transmission of business cycles: Evidence from dynamic correlations

We exploit dynamic correlations to estimate determinants of output comovement between OECD countries. Trade intensity, financial integration, and specialization patterns have significantly different effects on comovements at different frequencies. This sheds more light on previous results based on statistical filters.     

The transmission mechanism of business cycles among Germany,Japan, the UK and the USA

The study analyses the interdependent relationships of business cycles among four major countries using LA-VAR methods. The results are compared with results obtained using a standard VAR model. For the total sample (1962–1995), it is found that the economies of individual countries move independently and that inter-dependence is weak. However, causality from the USA to Japan, and from Japan to Germany can be observed. It is also found that the ripple effect differs in the first (1962–1973) and second (1973–1995) sample periods. A change in the international ripple effect on the business cycle may have occurred at the time of the first oil crisis. These results are almost robust to the empirical techniques employed in the analysis.     

Nonlinear dynamism of innovation and business cycles

The aim of this paper is to describe the nonlinear dynamism of innovation and to clarify the role of innovation for economic development in terms of Kondratiev business cycles, especially the causal relation of the bubble economy and depressions with innovations. Any paradigm of technological innovation develops within a definite time span reaching maturity. This nonlinear nature clarifies many characteristic features of innovation. Schumpeters innovation theory on business cycles is examined through this dynamism. Trunk innovation is defined as that which plays a decisive role in building infrastructures and inducing subsequent innovations. Every innovation has its own technological development period just before the innovation diffusion. The emergence of new markets can be estimated by chasing the ongoing technologies.JEL Classification: E32, L16, O11, O14, O30Paper presented at the 9th Conference of the International J.A. Schumpeter Society, Gainesville, Florida, USA.Previous affiliation was Ryutsu Kagaku University, Faculty of Information Science, Kobe, Japan.     

Endogenous technical progress,R&D periods and durations of business cycles

How do growth and cycles interact? Endogenous growth and business cycle theories are integrated to explain business cycles over different frequencies, especially at lower frequencies, on the balanced growth path. A new variable-R&;D time period-broadens the concept of intertemporal substitution and determines the durations of the medium and long cycles. As a result, the evolution of technology is separated from short-run shocks. A more promising new invention shrinks the R&;D period since waiting is costly, which pushes up the level of economic activity and causes a boom, while a less promising new invention does the opposite. The level of economic activity in turn affects the near-term growth rate. Thus, a recession is not caused by a negative shock as in the standard real business cycle models, but can be associated with a positive, though lower, growth rate of technology. The results capture the major features of U.S. data in both time and frequency domains.     

Real business cycles: is neglecting demand shocks justified?

Real business cycle models generally neglect demand shocks. Technological productivity shocks are the primary source of economic fluctuations. The multisectoral consequences of this assumption are described in the well-known model of Long and Plosser (1983). The presented paper shows that according to their view consumer goods sectors must be found in lagging positions. However, generalizing the strong assumption of pure supply driven dynamics by some demand-determined influences leads to ambiguous theoretical results such that only empirical evidence can answer the question whether sectoral lead-lag relationships are in accordance with real business cycle theory. Using cross spectral analysis and causality tests leads to a rejection of the Long and Plosser view of intersectoral comovements. On the contrary, the empirical results suggest that the backward propagation mechanism of demand shocks dominates the forward propagation of supply disturbances.     

Macro-financial linkages and business cycles: A factor-augmented probit approach

In this paper, we analyze macro-financial linkages in the euro area by implementing an innovative factor-augmented probit model estimated using a large database. In particular, our model specification enables the identification of the leading influence of financial variables on euro area business cycles, in addition to the coincident information conveyed by standard macroeconomic variables. We also point out that dynamic factor models lead to more accurate replication of business cycles than static ones.     

Measuring business cycles: Empirical Mode Decomposition of economic time series

This paper continues discussion on the issue of time series decomposition by presentation of the Empirical Mode Decomposition technique. This technique outperforms well-known time-series filters by providing a deeper insight into the structure of time series.