Can sticky consumption cause business cycles?

James McClure and David Chandler Thomas ()
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David Chandler Thomas: Ball State University

The Review of Austrian Economics, 2018, vol. 31, issue 1, No 3, 72 pages

Abstract: Abstract Sticky aggregate consumption is a demonstrable phenomenon in economies throughout the world, but to our knowledge it has not yet been incorporated into capital structure macroeconomics. Doing so suggests an explanation for business cycles. On the heels of a technological advance, sticky consumption facilitates increased savings and lower real interest rates. These lower rates lead to accelerating elongations in the capital structure. Even though such elongations facilitate more rapid economic growth, if duplicative overinvestment in research and development occurs, economic contraction will follow the exposure of such error.

Keywords: Sticky consumption; Business cycle; Hysteresis; Entrepreneur; Capital structure; Economic growth; Sequestered capital (search for similar items in EconPapers)
JEL-codes: E14 E21 E32 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s11138-016-0371-y

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