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Are business cycles inevitable?

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  • Kwasnicki, Witold

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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17295.

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Date of creation: Dec 2008
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Handle: RePEc:pra:mprapa:17295

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Keywords: business cycles; model; computer simulation;

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