Business Cycle Theory
Annotated Bibliography
Arnold, L. G. (2002). Business cycle theory. Oxford: Oxford University Press.
Business cycle theory is a comprehensive overview that engages a wide range of schools of thought to explain the cycles in business and which use different mathematical techniques and methods. This book is a great resource for students and academics alike who wish to engage in a historical overview of business cycle theories primarily after Keynes, but also to understand and identify the main elements that delineated the schools before keys. The book presents the information in both its historical and analytical context and underscores similarities and differences in a lively way.
Kydland, Finn E., (1995), Business Cycle Theory, Edward Elgar, Retrieved from
http://EconPapers.repec.org/RePEc:elg:eebook:565.
measurement, methodology, empirical cycles, shocks and balances (real and nominal).
Garrison, Roger W. (1989).The Austrian theory of the business cycle in the light of modern
macroeconomics," Reviewof Austrian Economics, vol. 3, 1989, pp. 3-29.
his resource gives details into the Austrian theory of business cycles. It describes the defining
features of Austrian views that includes commentary on “secondary deflation” aspects which is
essentially different than the structural problems with adjustments they were debating with other
schools of thought.
Alan S. Blinder. "Keynesian Economics." The Concise Encyclopedia of Economics.2008. Library of
Economics and Liberty. Retrieved February 1, 2016 from the Retrieved from:
http://www.econlib.org/library/Enc/KeynesianEconomics.html
This article gives an overview of Keynesian economics, particularly with regard to his views on
business cycles. It contextualizes this discussion in a historical context and relates the ideas to
contemporary theories.
Hansen, G. D. (1985). Indivisible labor and the business cycle. Journal of monetary
Economics, 16(3), 309-327.
This is a model by professor G.D. Hansen which exists as a research discussion for real business cycle theorists at the time that he wrote. Equilibrium business cycle models faced charges by critics of failing to account for fluctuations in labor cycle turnover rates that would result in fluctuations in the unemployment rate, the presence of unemployed workers in dynamic states as well as the idea that fluctuations are large relative to unemployment. Hansen's model, after extensive technical modeling, results in one that claims itself an equilibrium model which shows employment and unemployment changes relative to shocks. What is interesting to add about this solution, however, is Hansen's inclusion of a further criteria about elasticities. He says that independent of his model, we should assume also that the elasticity of substitution between labor and leisure is different times in the economy should be considered infinite and independent.
Mahoney, Dan (2001). Austrian business cycle theory: a brief explanation. Mises.org. Retrieved from
https://mises.org/library/austrian-business-cycle-theory-brief-explanation.
This article gives a concise overview of the theory of Austrian Business Cycle. It attempts to unify early developments with contemporary arguments. The first part dives into the historical context in which it emerged and the second part reflects on recent developments.
“Business Cycle Theory” (2009). The New School. Retrieved from
http://www.newschool.edu/nssr/het/essays/cycle/cyclecont.htm
This is an internet resource which gives the details of several schools of thought and their various
aspects. Sections include empirical issues, over-investment theories, monetary theories and
shock based theories. The URL is a main portal to individual essays and commentary.
Stock, J. H., & Watson, M. W. (1999). Forecasting inflation. Journal of Monetary
Economics, 44(2), 293-335.
This paper is a topic that is adjacent to business cycle theoretical work yet it concerns the same issues and the work itself is inevitably tied to an underlying model or orientation about how the economy really works. The paper is didactic in that it gives a general and more technical overview of two of the main techniques professional forecasters follow when forecasting inflation. Second, the paper puts forth an interesting argument that calls into question the use of the Phillips curve for future forecasts. Stock & Watson argue that the Phillips curve does not have a long history of stability, and for this reason This paper reassesses the use of the Phillips curve for forecasting price in#ation. We focus on three questions. First, has the US Phillips curve been stable? If not, what are the implications of the instability for forecasting future inflation? Stock & Watson also suggest that monetary theories of inflation automatically imply use of tools other than the Phillips curve, as do the term structure of interest rates.
Long Jr, J. B., & Plosser, C. I. (1983). Real business cycles. The Journal of Political
Economy, 39-69.
In this paper, Long and Plosser attempt to solve the real
argument. model of the RBC theory. The authors of the paper make reference to having having found approximately 10 distinct explanations of business cycle phenomena over the past They justify their analysis as worthwhile by profiling the model's behavior in a relatively “smooth state” economy. They argue that relatively high number of substitution possibilities that are normally in the economy result in something normal: that when significant shocks in the economy do occur, the reason why prices don' clear is because the huge amount of substitutions prevents the necessary price adjustments from working themselves out.
King, R. G., Plosser, C. I., & Rebelo, S. T. (1988). Production, growth and business cycles: The basic
neoclassical model. Journal of monetary Economics, 21(2), 195-232.
This paper argues that the neoclassical model of capital accumulation with choice of labor should be seen as the basic framework for use in real business cycle analysis. In this model, the authors assume steady state growth. The authors point out that for their real business cycle model to fit the data, then the model will have to encounter substantial technology shocks that happen on a repeat basis over time in order to deviate from a simply deterministic model.
Summers, L. H. (2002). 16 Some skeptical observations on real business cycle theory. A
Macroeconomics Reader, 389.
In this article, Summers critiques one of the main persons involved in real business cycle
theory. Summers critiques Prescott's theory which claims that it is invulnerable to critique because some aspects of the theory cannot be tested. Summers says that theories have been developed which were adequate at the time but which need to be revised or replaced once testing instruments get better.
Hodrick, R. J., & Prescott, E. C. (1997). Postwar US business cycles: an empirical investigation.
This article is one of the best I read so far because it helped me actually understand what
business cycles are in a historical perspective and why they matter. Business cycles are
aggregate fluctuations in economic variables that repeat as do sinal waves around growth
trajectories over the long term in capitalist economies experience repeated fluctuations about their long-term growth paths. Before Keynes, finding a way to reconcile these fluctuations
with standard equilibrium theory was the chief problem of economics. During Keynes' period, Prior to Keynes' General Theory, the study of these rapid fluctuations, combined with the attempt to reconcile the observations with an equilibrium theory, was regarded as the main outstanding challenge of economic research.
King, R. G., Plosser, C. I., & Rebelo, S. T. (1988). Production, growth and business cycles: The basic
neoclassical model. Journal of monetary Economics, 21(2), 195-232.
This paper argues that the neoclassical model of capital accumulation with choice of labor should be seen as the basic framework for use in real business cycle analysis. In this model, the authors assume steady state growth. The authors point out that for their real business cycle model to fit the data, then the model will have to encounter substantial technology shocks that happen on a repeat basis over time in order to deviate from a simply deterministic model.
References
Book
Arnold, L. G. (2002). Business cycle theory. Oxford: Oxford University Press.
Kydland, Finn E., (1995), Business Cycle Theory, Edward Elgar, Retrieved from
http://EconPapers.repec.org/RePEc:elg:eebook:565.
Internet Resource
Blinder, A "Keynesian Economics." The Concise Encyclopedia of Economics.2008. Library of
Economics and Liberty. Retrieved February 1, 2016 from the Retrieved from:
http://www.econlib.org/library/Enc/KeynesianEconomics.html
“Business Cycle Theory” (2009). The New School. Retrieved from
http://www.newschool.edu/nssr/het/essays/cycle/cyclecont.htm
Mahoney, Dan (2001). Austrian business cycle theory: a brief explanation. Mises.org. Retrieved fro
https://mises.org/library/austrian-business-cycle-theory-brief-expla
Garrison, Roger W. (1989).The Austrian theory of the business cycle in the light of modern
macroeconomics," Reviewof Austrian Economics, vol. 3, 1989, pp. 3-29.
Hodrick, R. J., & Prescott, E. C. (1997). Postwar US business cycles: an empirical investigation.
Long Jr, J. B., & Plosser, C. I. (1983). Real business cycles. The Journal of Political
Economy, 39-69.
King, R. G., Plosser, C. I., & Rebelo, S. T. (1988). Production, growth and business cycles: The basic
neoclassical model. Journal of monetary Economics, 21(2), 195-232.
Stock, J. H., & Watson, M. W. (1999). Forecasting inflation. Journal of Monetary
Economics, 44(2), 293-335.
Summers, L. H. (2002). 16 Some skeptical observations on real business cycle theory. A
Macroeconomics Reader, 389.
