The Trade Cycle

Esteban Perez Caldentey

Chapter Chapter 3 in Roy Harrod, 2019, pp 125-172 from Palgrave Macmillan

Abstract: Abstract The Trade Cycle (1936a) provided the first articulated version of Harrod’s dynamics. It is based on the interaction between the multiplier and the relation (i.e., the accelerator) and their respective dynamic determinants. The interaction between the accelerator and the multiplier produced a cumulative upward or downward deviation from a steady advance. Harrod’s book had a wide reading, but several of the reviews were unfavorable. The most significant criticisms focused on the two major innovations of the trade cycle: the multiplier–accelerator interaction and the significance and stabilizing role of the law of diminishing elasticity of demand. At the time he started to work on the trade cycle, Harrod also played a key role in the creation, organization, and work of the Oxford Economists’ Research Group (OERG) in 1936. The most important research of the OERG focused on the effect of interest rates on investment and on entrepreneur’s pricing policy over the course of the business cycle.

Date: 2019
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DOI: 10.1057/978-1-349-74085-7_3

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