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Are business cycles inevitable?

Witold Kwasnicki

MPRA Paper from University Library of Munich, Germany

Abstract: The simulation model of business cycles emergence is proposed. In the first section a preliminary model of well known hog’s cycle is presented. The hog’s cycle is used as a metaphor for more general model of business cycles, which is presented in the second section. Emergence of fluctuations requires a tuning of numerous factors (the investment and price delays, the growth rate of the market, the capital productivity growth rate, capital depreciation rate, elasticity of demand). It turns out that the greater the market growth rate and the more elastic (competitive) market the more probably is that the fluctuations are damped. We may venture to propose a kind of recipe to avoid (or at least to delimit) economic fluctuations: we ought to create friendly regulatory conditions for entrepreneurs to ensure highest potential long term growth rate and to minimize investment delays.

Keywords: business cycles; model; computer simulation (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2008-12
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