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The Trade Cycle

In: Roy Harrod

Author

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  • Esteban Pérez Caldentey

Abstract

The Trade Cycle (1936a) provided the first articulated version of Harrod’s dynamics. It is based on the interaction between the multiplier and the relation (i.e., the accelerator) and their respective dynamic determinants. The interaction between the accelerator and the multiplier produced a cumulative upward or downward deviation from a steady advance. Harrod’s book had a wide reading, but several of the reviews were unfavorable. The most significant criticisms focused on the two major innovations of the trade cycle: the multiplier–accelerator interaction and the significance and stabilizing role of the law of diminishing elasticity of demand. At the time he started to work on the trade cycle, Harrod also played a key role in the creation, organization, and work of the Oxford Economists’ Research Group (OERG) in 1936. The most important research of the OERG focused on the effect of interest rates on investment and on entrepreneur’s pricing policy over the course of the business cycle.

Suggested Citation

  • Esteban Pérez Caldentey, 2019. "The Trade Cycle," Great Thinkers in Economics, in: Roy Harrod, chapter 0, pages 125-172, Palgrave Macmillan.
    • Handle: RePEc:pal:gtechp:978-1-349-74085-7_3
    DOI: 10.1057/978-1-349-74085-7_3
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