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From cycles to shocks: progress in business-cycle theory

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  • Satyajit Chatterjee

Abstract

Boom leads to recession, recession to boom, and the economy is caught in a self-sustaining cycle. Or is it? More recent economic theory states that cyclical fluctuations in the economy are caused by shocks and other disturbances that continually buffet the economy. In this article, Satyajit Chatterjee examines the historical process by which the explanation of fluctuations in the economy has evolved from a theory of cycles to one of shocks.

Suggested Citation

  • Satyajit Chatterjee, 2000. "From cycles to shocks: progress in business-cycle theory," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 27-37.
  • Handle: RePEc:fip:fedpbr:y:2000:i:mar:p:27-37
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    References listed on IDEAS

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    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    2. Plosser, Charles I, 1989. "Understanding Real Business Cycles," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 51-77, Summer.
    3. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    4. Jeffrey Campbell, 1998. "Entry, Exit, Embodied Technology, and Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 371-408, April.
    5. Satyajit Chatterjee, 1995. "Productivity growth and the American business cycle," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 13-22.
    6. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
    7. Marianne Baxter & Robert G. King, 1991. "Productive externalities and business cycles," Discussion Paper / Institute for Empirical Macroeconomics 53, Federal Reserve Bank of Minneapolis.
    8. Farmer Roger E. A. & Guo Jang-Ting, 1994. "Real Business Cycles and the Animal Spirits Hypothesis," Journal of Economic Theory, Elsevier, vol. 63(1), pages 42-72, June.
    9. King, Robert G. & Plosser, Charles I., 1994. "Real business cycles and the test of the Adelmans," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 405-438, April.
    10. Satyajit Chatterjee, 1999. "Real business cycles: a legacy of countercyclical policies?," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 17-27.
    11. Jeffrey C. Fuhrer & Scott Schuh, 1998. "Beyond shocks: what causes business cycles?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun).
    12. Peter Temin, 1998. "Causes of American business cycles: an essay in economic historiography," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 37-64.
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    Citations

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    Cited by:

    1. Marco A. Espinosa-Vega & Jang-Ting Guo, 2001. "On business cycles and countercyclical policies," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 1-11.
    2. J.P.G. Reijnders, 2007. "Impulse or propagation? How the tides turned in Business Cycle Theory," Working Papers 07-07, Utrecht School of Economics.
    3. Escañuela Romana, Ignacio, 2016. "Azar, Determinismo e Indecidibilidad en la Teoría del Ciclo Económico
      [Randomness, Determinism and Undecidability in the Business Cycle Theory]
      ," MPRA Paper 72978, University Library of Munich, Germany.
    4. Ignacio Escañuela ROMANA, 2016. "Randomness, Determinism and Undecidability in the Economic Cycle Theory," Journal of Economics and Political Economy, KSP Journals, vol. 3(4), pages 638-658, December.
    5. Gopalan, Sasidaran, 2006. "A causal investigation of aggregate output fluctuations in India," MPRA Paper 33063, University Library of Munich, Germany.

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    Keywords

    Business cycles;

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