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US Business Cycles from 1971-2010: A Post Keynesian Explanation

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  • John Harvey

    ()
    (Department of Economics, Texas Christian University)

Abstract

Curiously and in spite of its name, very few business cycle theories actually treat it as a cycle. Mainstream economics, for example, models all macroeconomic fluctuations as a function of exogenous forces. In their view, the economy remains at full employment indefinitely unless impacted by some external event. Post Keynesian economists disagree strongly with this characterization, arguing instead that business-cycle fluctuations are endogenously generated. The goal of this paper is to compare the explanatory power of four business cycle models–three mainstream and one Post Keynesian–for the US economy since 1971. While the test employed is a simple one, the results are very clear: no model’s performance comes even close to that of the one based on Keynes’ seventy-year old analysis.

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File URL: http://www.econ.tcu.edu/RePEc/tcu/wpaper/wp10-04.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Texas Christian University, Department of Economics in its series Working Papers with number 201004.

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Length: 13 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:tcu:wpaper:201004

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Web page: http://www.econ.tcu.edu/
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Keywords: business cycle; Keynes; Post Keynesian;

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  1. Plosser, C.I., 1989. "Understanding Real Business Cycles," Papers 89-03, Rochester, Business - General.
  2. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457.
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