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Neglected Theories of Business Cycle—Alternative Ways of Explaining Economic Fluctuations

Author

Listed:
  • Klára Čermáková

    (Department of Economics, Prague University of Economics and Business, 130 67 Prague, Czech Republic)

  • Michal Bejček

    (Faculty of Mathematics and Physics, Charles University, 110 00 Prague, Czech Republic)

  • Jan Vorlíček

    (Department of Economics, Prague University of Economics and Business, 130 67 Prague, Czech Republic)

  • Helena Mitwallyová

    (Department of Economics, Prague University of Economics and Business, 130 67 Prague, Czech Republic)

Abstract

The business cycle is a frequent topic in economic research; however, the approach based on individual strategies often remains neglected. The aspiration of this study is to prove that the behavior of individuals can originate and fuel an economic cycle. For this purpose, we are using an algorithm based on a repeated dove–hawk game. The results reveal that the sum of output in a society is affected by the ratio of individual strategies. Cyclical changes in this ratio will be translated into fluctuations of the total product of society. We present game theory modelling of a strategic behavioral approach as a valid theoretical foundation for explaining economic fluctuations. This article offers an unusual insight into the business cycle’s causes and growth theories.

Suggested Citation

  • Klára Čermáková & Michal Bejček & Jan Vorlíček & Helena Mitwallyová, 2021. "Neglected Theories of Business Cycle—Alternative Ways of Explaining Economic Fluctuations," Data, MDPI, vol. 6(11), pages 1-12, October.
    • Handle: RePEc:gam:jdataj:v:6:y:2021:i:11:p:109-:d:661024
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    References listed on IDEAS

    as
    1. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    2. Jan Vorlicek & Klara Cermakova, 2017. "Strategic Behavior as the Cause of Business Cycles," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 6(1), pages 33-40, May.
    3. Steve Keen, 1995. "Finance and Economic Breakdown: Modeling Minsky’s “Financial Instability Hypothesis”," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 17(4), pages 607-635, July.
    4. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 14(Spr), pages 3-18.
    5. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
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