Economic development does not occur evenly and represents successive ups and downs in the level of economic activity, manifested in various forms of discrepancy between aggregate demand and aggregate supply.

Periodically recurring fluctuations in the movement of social production (increase in business activity, its decline, subsequent growth, etc.) characterize the economic cycle, otherwise the business activity cycle. Exactly consistency, repeatability, regularity, reproducibility and systematicity the occurrence of events are essential features cyclical development.

Cyclic development is inevitable and stems from the characteristics of the technology and technology of the machine stage of development of productive forces. Since scientific and technological progress is carried out in steps, the development of production is carried out in steps - in cycles. First economic crisis occurred in England in 1825. Since then, approximately every 10 years, the economic equilibrium of the reproduction process has been disrupted - sales difficulties arise, production has fallen, capital investment has decreased, and the credit sector has been shaken. In 1857, the first world crisis of overproduction took place.

Cyclical fluctuations are considered to be fluctuations that affect economic activity in the economy as a whole, that is, market fluctuations. They should be distinguished from seasonal fluctuations (in agriculture, construction, tourism), which affect only certain industries and do not have a significant impact on the national economy.

Cyclical fluctuations occur in a wave form around a long-term trend - the trend of economic development, defined as a growth trend. Spiral movement is a characteristic feature and expression of a progressive character cyclical development.

Despite the fact that individual business cycles differ in duration and intensity, they all have the same phases (Fig. 4.1
). In the structure of the cycle, the highest point of economic activity is distinguished - peak (points b and f) and low point of economic activity- the bottom (point d), and the ascending phase lying between them - the rise (expansion) phase and the descending phase - the decline (compression) phase. Deviation of the peak or trough of the decline from the trend line characterizes the amplitude of cyclic oscillations. The time interval between two identical states of economic conditions called the period of the business cycle.

A more detailed analysis of the cycle allows us to distinguish four phases in it, when the rise phase is divided into a recovery phase and the rise itself, and the decline phase is divided into crisis and depression.

The lifting phase is characterized increases in capital investment, employment, income, consumer demand and money supply(inflation). Expansion of production begins to outstrip demand. The economy is above potential output and is called “overheated.” A decrease in business activity due to “overheating” creates the preconditions for a crisis phase.

Crisis (recession) characterized by a curtailment of production and a decrease in profits, an increase in the mass of unsold products, an increase in unemployment and a decrease in living standards, and a depreciation of fixed capital.

Enterprises facing the threat of bankruptcy agree to high interest loans exceeding the average rate of return.

Prices fall only if the decline in production is severe (in the classic situation, stagflation occurs, which manifests itself in a simultaneous reduction in production, rising unemployment and inflation).

A crisis is usually creates incentives to reduce production costs, leads to the renewal of means of production and manufactured products, that is, it becomes an impetus for economic development. Thus, in During the crisis phase, on the one hand, the normal cycle of reproduction is disrupted, but on the other hand, at the same time, conditions are being created for the progressive renewal of capital, reducing production costs, improving product quality, which makes this phase main phase of the economic cycle.

Depression represents the deepest downturn in business activity. Output reaches its lowest level and unemployment reaches its highest level. There is no demand for money capital from entrepreneurs. The interest rate falls. Inventory is reduced by selling it at reduced prices or by destroying it. The economic situation is stabilizing.

In the revival phase demand for fixed capital increases. On a new technical basis, production expands, first in the main industries, and then in other sectors of the economy. Investments, employment, wages are growing, consumer demand is expanding, production output is increasing. When output exceeds the pre-crisis level, the recovery phase gives way to a recovery phase. Thus, the economic cycle is the period within and on the basis of the material preconditions of which the emergence and resolution of contradictions of economic growth occur.

The most important characteristics of the phases of the economic cycle are the dynamics of GDP, the level of capacity utilization and the unemployment rate. Depending on how the value of economic variables changes during the cycle, they are divided into procyclical and countercyclical parameters.

Procyclical parameters- these are those that increase during the expansion phase and decrease during the recession phase (for example, aggregate output, capacity utilization, general price level, interest rate).

Countercyclical parameters- These are those that increase during a recession and decrease during an expansion (for example, the unemployment rate, finished goods inventories, the number of bankruptcies). Economic variables whose dynamics do not show any connection with the phases of the economic cycle are called acyclic parameters(for example, export volume).

The rates of change of various parameters usually do not coincide, provided that some procyclical variables increase, others are already decreasing, and vice versa, if some countercyclical variables decrease while others increase.

Therefore, the cycle parameters are also divided into leading, lagging and corresponding if they reach their optimal value (maximum or minimum) before or after the onset of the highest or lowest point of economic activity. Leading cycles reach a maximum or minimum before reaching a peak or bottom, for example, if there are changes in inventories or the money supply.

Lagging cycles reach a maximum or minimum after reaching a peak or bottom, for example, if wage costs and interest rates of commercial banks have changed.

Corresponding cycles reach their maximum at the time of the highest or lowest point of economic activity, for example, as a result of changes in the unemployment rate.

The discrepancy between the rates of change in various cycle parameters ensures a smooth change in the phases of rise and fall.

In the general structure of economic crises, one should distinguish structural crises, which are called crises that cover only certain elements of the economic system: agricultural production, energy production, monetary sphere, etc. The patterns of the course of these crises have some specific features.

To analyze economic development, a classification of cycles is used based on two criteria:

1) from the perspective of the driving forces that determine the emergence and mechanism of the economic cycle;

2) the temporal aspect, characterizing the duration of the cycle.

All the many approaches to explaining the causes and mechanism of the business cycle in modern economic theory are combined into three large groups.

1. External theories- proceed from the premise that the cycle is caused by external (exogenous) reasons lying outside the boundaries of economic systems. Such reasons may be:

Population migration (Kuznets),

Discovery of gold deposits, new lands and resources, innovations ( Kondratieff, Schumpeter, Hansen),

Wars, revolutions, political events and elections, natural factors, including the frequency of solar activity ( Jevons, Chizhevsky, Hubbert),

Fluctuations in the optimistic and pessimistic mood of the population (Pigou, Bagehot), etc.

2. Internal theories- start from the premise, then the cycle is conditioned internal (endogenous) reasons. Such reasons may be:

An increase in the demand for consumer goods, leading to a manifold increase in the demand for equipment and machinery (Clark),

Fluctuations in the marginal efficiency of capital (Keynes, Hicks),

Underconsumption of income, that is, underinvestment (Hobson, Foster),

Overinvestment (Hayck, Mises),

The contradiction between the social nature of production and the private capitalist form of appropriation of the results of production (Marx);

Expansion and contraction of bank credit and other problems in the sphere of money circulation (Hawtrey, Mitchell), etc.

3. Synthetic theories- these are theories that combine the causes of cyclicity; they are based on the premise that the economic system, in accordance with its internal nature, responds to fluctuations in external factors, that is, external causes set the initial impulses, and internal causes develop them into phase fluctuations ( Samuelson, Boyer, Bertrand, Lipets).

From point of view time criterion The following main cycles are distinguished:

1. Short-term Kitchin cycles- have a duration of 3-5 years and are manifested in fluctuations in the inventories of enterprises. They are caused by the restoration of the disturbed macroeconomic equilibrium in the consumer market (first-order equilibrium).

2. Medium-term Juglar cycles or classical cycles- have a duration of 7-11 years. The mechanism for deploying the medium-term cycle is associated with the depreciation and renewal of fixed capital at industrial enterprises without major changes in the existing technological base. Medium-term cycles result from macroeconomic equilibrium achieved in the process of price formation through the intersectoral flow of capital invested in equipment.

3. Kuznets cycles (construction, reproductive or demographic cycles) - have a duration of 25-30 years. Their driving forces are shifts in the reproductive structure, caused by the periodic renewal of housing and certain types of production facilities.

4. Large cycles (long waves) or Kondratiev cycles- have a duration of 40-60 years. These cycles arise as a result of radical changes in the technological base of social production and its structural restructuring. Long waves arise as a result of a deviation from equilibrium, the so-called third order, which corresponds to changes in the stocks of basic capital goods (railroads, canals and other elements of production infrastructure), the specifics of the existing industrial structure of production, the state of the existing raw material base, energy sources, prices, employment, monetary system.

Long wave theory was founded by a Russian economist N.D. Kondratiev in 1922 in the work “The World Economy and Its Conjunctures During and After the War.”

Kondratiev identified 3 large cycles: the first - approximately 1800 - 1850; the second - 1850 - 1900, the third - 1900 - 1940s.

Great contributions to the theory of long waves were made by Clark, Mitchell, Schumpeter, Rostow etc. This theory demonstrates the unity and interaction of economic dynamics and the economic cycle - cyclicality is a form of manifestation of uneven economic growth.

5. Modelsky cycles - have a duration of 90-120 years and are associated with periods of global world wars and the establishment of world political and economic power.

6. Toffler's civilization cycles lasting 1000 years. The study of these cycles is objectively difficult within one generation and can hardly be reliably described.

All cycles are superimposed on one another. The basis of cyclicality is long waves. Depending on which wave of the large cycle coincides with the usual ones, the effect of the last cycles is strengthened or weakened.

Since cyclical fluctuations are closely related to the motive investment activity, then there is unevenness of cyclical fluctuations across sectors of the national economy. The decline is most pronounced in industries producing durable goods, and to a lesser extent in industries producing non-durable goods.

In the 20th century, a deformation of the business cycle occurred in the form of the emergence of such trends as:

- blurring of cycle phases:

Crises became short-lived and shallow;

Due to the low pace of development, the rise phase is not sharply distinguished; depression can occur not only after a crisis, but also during the recovery phase;

- asynchrony of the world cycle, that is, the discrepancy in different countries and regions of the onset of cycles in time, their duration and phases.

Changes in the manifestations of cyclicity are caused by a variety of factors. Ultimately, these are factors that change the reproduction process itself - high rates of scientific and technological progress, leading to the constant emergence of new types of products and industries; reduction of the sphere of material production and expansion of the sphere of non-material production; expansion of forecasting of economic processes, which reduces the spontaneity of market development, etc.

Cyclic development is natural, but this does not mean that society should experience such severe shocks as during the Great Depression of 1929 - 1933.

After the Great Depression, measures of state countercyclical regulation, the theoretical foundations of which were formulated by Keynes, were applied in practice for the first time. Keynes believed that the cause of crises is the lag of production and consumption due to unemployment, insufficient entrepreneurial activity and high levels of savings. Keynes considered the most important anti-crisis measures to be strengthening the investment activity of the business sector and the state, lowering the interest rate, and expanding public works.

Supporters of monetarism argue that government measures to stimulate demand, recommended by Keynesians, not only do not improve the state of the economy, but also give rise to new imbalances and crisis downturns. As methods of combating a recession in the economy, they propose maintaining the stability of the money supply and regulating the relationship between the level of national income and the stock of money.

Test questions for lecture 4

1. What causes cyclicality?

2. What phases does the economic cycle contain?

3. What indicators can be used to track the phases of the economic cycle?

4. What are the main types of economic cycles?

5. Who discovered short, medium and long waves of cyclical economic development?

6. What causes and what is the duration of short-term cycles?

7. Why is it necessary to determine which cycle the national economy is on?

8. Who discovered what causes and what duration is inherent in the average cycles?

9. Who discovered long cycles and what is their significance in macroeconomics?

When we consider issues of the cycle mechanism, we must separate the concept of the mechanism of the economic cycle and the concept of the mechanism of the economic crisis. These are concepts related to each other, but far from identical.

Business cycle mechanism-- this is a set of relationships in the economy that prevent the economy from achieving long-term equilibrium, deviating the trajectory of development of economic processes from the trajectory directly leading to a state of equilibrium; or which prevent an economy that has reached equilibrium at a non-zero rate from stopping at that point. For example, in the investment business cycle mechanism, these are economic relationships that force firms to continue investing after achieving optimal capital ratio.

There is no consensus on the mechanism of cyclical economic development. On the contrary, there are a huge number of theories that explain the business cycle. Now we will look at the main theories.

11.2. Unemployment, its forms, causes, consequences.

11.3. Inflation, its types and consequences. Stagflation.

11.4. The relationship between unemployment and inflation. Phillips curve.

Okun's Law.

11.1. Economic cycles. Business cycle. Business model

Hicks-Frisch cycle.

In the previous lecture, we looked at the system of national accounts, which is a system of tools for analyzing the state and dynamics of the national economy. Real macroeconomic variables (GDP, income, etc.) increase with the growth of the national economy. But their change is not linear. The economy is characterized by instability. It can be shocking, difficult to predict, and caused rather by exogenous factors (natural, political disasters). But it can be in the nature of regular fluctuations, since the economy, striving to achieve equilibrium, overcomes various kinds of imbalances caused by endogenous factors along its way. Disproportions have varying degrees of intensity, which is manifested in the dynamics of micro- and macroeconomic indicators.

To micro indicators subject to change, include the volume and dynamics of market demand and supply, securities rates, stock indices, the level and dynamics of wages, the number and volume of business transactions, their dynamics and frequency, the degree of equipment utilization and personnel employment.

At the macro level, the volume and dynamics of GDP, aggregate demand, aggregate supply, price level, volume of investment, net exports, etc. are subject to fluctuations. Changes are also taking place in the structure of aggregate consumption of the population (dynamics and share of demand for essential goods, durable goods and luxury). Macroeconomic variables do not change chaotically, but in accordance with certain patterns: growth rates first increase, then slow down to zero, after which they acquire negative values. The recession is followed by a new rise. The regularity of such fluctuations indicates the cyclical nature of economic development. The branch of economic science that studies these fluctuations is the theory of business cycles, which allows one to study economic dynamics and explain the reasons for fluctuations in economic activity in the national economy over time.

Economic cycle– periodic fluctuations in levels of economic activity: output, employment, price level.

The economic cycle is usually understood as a sequence of repeating alternative phases. Each phase creates the conditions for the onset of the next, which leads to the reproduction of the cycle. Today, many economists recognize the existence of a whole system of economic cycles. The main criteria for identifying their types are: 1) cycle duration, 2) mechanisms of manifestation, 3) reasons for existence. Moreover, cycles of different durations overlap each other, modifying the manifestations of each other. There are long economic cycles (40-60 years), medium or business cycles (4-8 years), and short ones (2-4 years).

The most studied today is the so-called business cycle, graphically presented in Figure 11.1.

It includes four phases: rise (expansion), peak, decline (recession), bottom (depression). At the same time, the economy moves from a state of underemployment (bottom) to full employment (peak). Thus, the business cycle is the time interval between two identical states of economic conditions. During the recovery phase, investments, total income, total demand and total supply, and employment grow.

Business cycle – periodic fluctuations in economic conditions in a market economy, measured by the time interval between two subsequent identical phases.

The growth rate of these indicators, approaching the peak phase, slows down. Here the highest level of employment, total income, demand, and investment in a given cycle is achieved. As employment increases, wages increase and the general price level rises. Rising prices outpace wage growth, which reduces demand for durable goods. The economy begins to move from full employment to underemployment (recession phase). When the identified downward trend becomes stable, the population begins to adapt to new conditions: aggregate demand begins to decline faster than aggregate supply, which accelerates the decline and the approach of the economy to the bottom point. A fall in aggregate demand causes a decline in the general price level. The depression phase begins, characterized by zero rates of economic decline, low levels of employment, aggregate demand, aggregate supply, and investment. During this period, the economy is cleared of ineffective decisions, ineffective entrepreneurs, and competition intensifies. In an effort to reduce costs, firms begin to update equipment, which causes an economic revival that turns into an upswing.

The nature of each specific business cycle also depends on the interaction with other types of cycles, since cycles of shorter duration occur against the background of longer cycles. Thus, Kondratiev cycles, characterized by two phases (upward wave and downward wave), determine the type of curve demonstrating the business cycle. On the upward wave of the Kondratiev cycle, when the national economy is transitioning to its new technological base, the upswings are very intense and long-lasting, and the downturns are less noticeable. This is explained by the fact that each new rise in the business cycle is initiated by the development of a new technological base of the national economy. The downward wave of the Kondratieff cycle is characterized by long and deep downturns in the business cycle and a reduction in its duration.

Kondratieff cycle- a theoretical long-term cycle in which the movement from boom to recession takes about 30 years, and on which business cycles of shorter periods are superimposed.

Examples include the Great Depression (crisis of 1929-1933) and the crises of 1969-70, 1974-75, 1980-82, which occurred during the downward wave of the fourth Kondratiev cycle. The reasons for this are the gradual exhaustion of the potential of the already established technological base of the economy, as well as monetary dynamics.

There is still no consensus among economists regarding the reasons for the cyclical nature of the economy. First of all, the approaches to the problem themselves differ. Thus, D. Ricardo and J.-B. Say (late 18th – early 19th centuries), convinced of the ability of a market economy to self-regulate, denied the very possibility of nationwide economic crises. Others recognize the possibility of cyclicality, but see the sources of its causes differently. Some economists proceed from the fact that the cyclical nature of the economy is generated by factors external to the economy, such as fluctuations in solar activity (S. and E. Jevons), cyclical weather fluctuations (S. Moore), changes in psychology (V. Pareto, A. Pigou ), wars and the activation of the state (R. Frisch and others), cyclicality in the development of scientific and technological progress (J. Schumpeter, J. Hicks). Thus, in the Hicks-Hansen model, cyclical fluctuations are explained by the interaction of commodity and money markets, when, for example, under the influence of scientific and technological progress in the economy, autonomous investments arise. To stimulate the mass development of advanced technologies, the state usually helps to improve the investment climate. Then potential investors, optimistically assessing economic prospects and focusing on the existing interest rate, increase the size of investments, using savings reserves for this. As a result, there will be an expansion in production volumes, followed by an increase in total income. The economy is booming. All this will have an impact on the money market. If the supply of money does not change (the state does not issue money), and part of the increase in total income turns into additional demand for money (for credit), then the interest rate will rise. An increase in interest rates will have a negative impact on the commodity market. Assessing the future rate of profit in the context of rising credit costs, producers will begin to curtail investment demand. As a result, the growth of investment, production, total income, and therefore savings slows down.

The Hicks–Frisch model is also interesting (Fig. 11.2.).

According to it, cyclical fluctuations are caused by autonomous investments, i.e. investments in new products, new technologies, etc. Autonomous investments do not depend on income growth, but on the contrary, they cause it. An increase in income leads to an increase in investments, depending on the amount of income: the multiplier effect - the accelerator - operates. This effect will be discussed in more detail in the next lecture. With a constant marginal propensity to save (the ratio of the increase in savings to the increase in income), investments will increase cumulatively, which means an upswing in the economy. But economic growth cannot occur without limit. The barrier limiting growth is full employment (line AA). Achieving full employment means there is a high demand for labor, and, consequently, an increase in wage rates. Since the economy has reached a state of full employment, further growth in aggregate demand does not lead to an increase in the national product. As a result, the growth rate of wages begins to outstrip the growth rate of the national product, which becomes a factor in inflation. Rising inflation has a negative impact on the state of the economy: business activity of economic entities falls, the growth of real incomes slows down, and then they fall. Now the accelerator (the ratio of investment growth to income growth in the previous period) acts in the opposite direction. If during a boom the multiplicative acceleration mechanism “accelerated” the economy, then during a recession it “collapses” it. This continues until the economy “collides” with the BB line - negative net investment (when net investment is insufficient even to replace worn-out fixed capital). Competition is intensifying and the desire to reduce production costs encourages financially stable firms to begin renewing fixed capital, which ensures economic growth.

The Hicks-Hansen and Hicks-Frisch models are neo-Keynesian. Modern schools of macroeconomics give a different interpretation of the nature of business cycles.

Monetarists explain the cyclical fluctuations of the economy by changes in the money supply: the money supply reaches its maximum value and begins to decline even before reaching the highest point of the business cycle, and the minimum value of the money supply and the beginning of its growth occurs during the recession, and before reaching the bottom of the business cycle. According to M. Friedman, an ordinary recession developed into a catastrophic crisis of 1929–1933 as a result of erroneous actions of the US Federal Reserve System, which sharply “squeezed” the money supply several months before the so-called “Black Tuesday” on October 29, 1929. According to monetarism, more consistent government monetary policy will lead to a smoother business cycle.

In contrast to monetarism, the theory of rational expectations (new classical school) proceeds from the fact that money is neutral not only in the long term, as M. Friedman believes, but also in the short term. Fluctuations in the money supply are caused by fluctuations in GDP, and not vice versa. Fluctuations in GDP are the result of changes in aggregate supply. According to this theory, cyclical fluctuations are explained by limited information and misinterpretation of price signals by entrepreneurs.

So, in economic theory today there are different approaches to understanding the cyclical nature of the economy. But the upward trend of economic development (the trend of potential GDP growth in Fig. 11.1 connects the midpoints of the cycle phases corresponding to full employment) indicates that although the cyclical nature of the economy is evil, it is an inevitable evil.

Cyclicality is characteristic of an established market economy. The crisis of the Russian economy in the 90s of the twentieth century is not cyclical, but transformational. With the completion of the transition from a planned economy to a market economy, the cyclical nature characteristic of the latter will manifest itself.

An important factor in economic dynamics is cyclicality, which is expressed in the periodic interruption of economic growth by recession, in the uneven functioning of various elements of the national economy, and in the change of revolutionary and evolutionary stages of its development. Cyclical fluctuations are associated with huge costs for the economy, so macroeconomic theory seeks to understand not only the causes of these fluctuations, but also to develop recommendations for the government to smooth them out. However, the theory of economic cycles, despite its almost two-hundred-year history, did not predict a single economic crisis that occurred. Deep crises also lead to significant changes in macroeconomic theory and macroeconomic policy.

This chapter examines the causes of business cycles, a system of indicators that describe cycles and the main theoretical approaches to their study. Scientists have different opinions on cycle theory; accordingly, cycle models have been developed from both Keynesian and classical approaches.

4.1 Causes of the business cycle and its characteristics

The history of economic development shows its nonlinear, cyclical development. Cyclical fluctuations must be distinguished from a trend, which expresses a long-term trend in economic development and is determined by the fundamental structural parameters of the economic system. The cyclical component represents a deviation from the trend under the influence of various macroeconomic shocks (impulses). To highlight the trend and deviations of actual results from the trend, a decomposition of the time series containing the values ​​of real GDP is carried out. Standard decomposition techniques are taught in econometrics courses.

The nature of the cyclical development of the economy is debatable. It is customary to distinguish between exogenous shocks, the mechanism of occurrence and spread of which is more or less clear, and endogenous shocks, the origin and spread of which are not clear. In macroeconomic theory, all shocks are divided into three groups:

1) shocks in aggregate demand, expressing changes in investment and consumer spending (neo-Keynesian theory) and changes in the supply of money (new classical theory);

2) aggregate supply shocks associated with technological shifts, discoveries of new sources of raw materials, changes in nominal wages and world prices for raw materials, natural disasters (real business cycle theories);

3) political shocks resulting from decisions of political institutions that affect aggregate demand and aggregate supply (the theory of political business cycles).

The direction and degree of change in indicators characterizing economic dynamics is called economic conditions, and the time interval between two identical states of economic conditions is called the business cycle. Cycles are characterized by duration, phases, repetition and one direction.

According to the American Foundation for the Study of Business Cycles, history knows 1380 cycles. Based on the duration criterion, that is, the time interval between two identical states of the economy, it is customary to distinguish the following cycles:

Agricultural cycles (up to one year);

Inventory by D. Kitchan (2 – 4 years);

Business cycles of K. Juglar (7 – 10 years);

Construction (investment) by S. Kuznets (15 – 25 years);

Long-term opportunistic N. Kondratiev (50 – 60 years);

Formation cycles of M. Evans (110 years);

Political cycles of J.Modelsky (90 – 120 years);

Secular waves by F. Braudel (100 – 150 years);

Civilization cycles of J. Forrestel (200 years);

Cycles of the era of E. Toffler (1000 - 2000 years).

As a rule, there are four phases in the structure of business cycles: crisis (recession), depression (bottom), recovery and recovery (boom). Each stage of the cycle is distinguished by its corresponding processes, but the most important are crisis and recovery. In the crisis phase, not only a number of contradictions that arose in the previous cycle are resolved, but also new sources and structures are formed that will contribute to the development of the economy on a new basis. As a rule, recovery phases are longer than crisis phases.

Elevation and depression are turning points (turning points) business cycle, changing the direction of development. Over the past half century, economists, analyzing a huge amount of economic information, have learned to predict the trend of economic development, but cannot yet predict the timing of turning points. This is confirmed by the global crisis of 2008–2009. In countries with developed market economies, composite cyclical indices are calculated based on statistical data on 80 indicators. The beginning of the crisis is considered to be the upper turning point of this index.

Table 4.1

Groups of indicators for calculating the composite index

Although the phases of the cycle do not have regular and predictable intervals of occurrence and duration, they nevertheless repeat. The standard dynamics of economic boom and recession are repeated in developed economies. The repeatability of the cycle phases is clearly visible in the dynamics of Russian real GDP.

Rice. 6.1 Dynamics of real GDP in Russia

The unidirectionality of the cycle is manifested in the fact that the trend of change of many economic variables occurs together in a predictable direction throughout the entire cycle. Cycles of varying degrees cover almost all sectors of the economy, but the amplitude of fluctuations in individual macroeconomic variables is not the same. Fluctuations in investment are always stronger than GDP, and fluctuations in GDP are stronger than employment and consumption. Financial market indicators are highly sensitive to the business cycle.

Rice. 4.2 Dynamics of some macroeconomic indicators in Russia, %

To analyze the business cycle, it is necessary to study the direction of the dynamics of macroeconomic indicators and the time of change in the direction of their movement. From the point of view of the direction of movement, procyclical, countercyclical and acyclical indicators are distinguished. Pro-cyclical indicators change in a direction that coincides with the phases of the cycle (product output, capacity utilization, labor productivity, monetary aggregates, nominal interest rate, price level, profit margin, stock prices, etc.). Countercyclical indicators change in the opposite direction in relation to the phases of the cycle (unemployment level, the number of bankruptcies of legal entities, the size of finished product inventories). Changes in acyclic indicators are not related to the economic cycle (product exports, real interest rates).

From the point of view of time, changes in the direction of dynamics are distinguished by leading, lagging and corresponding variables. Leading indicators are indicators that reach their maximum value before reaching the peak of the economic situation and, accordingly, reach their lowest value before the lowest level of the cycle (average length of the working week, changes in inventories, profits and money supply, the number of newly created enterprises). Using weighted averages of time series of these indicators, leading indicators are calculated.

Lagging indicators are indicators that reach their maximum value after reaching an economic peak and their corresponding minimum value after the lowest level of economic conditions (the number of unemployed, the average level of interest rates, unit wage costs, expenses for new equipment, investments in fixed capital, household contributions to banks, credit investments in the economy).

Coincident indicators are indicators of change that correspond to changes in economic activity (GDP, unemployment rate, personal income, producer prices, refinancing rate, retail and wholesale trade turnover). Using weighted averages of the time series of these indicators, matching indicators are calculated.

Since the 1930s, a system of coinciding and leading indicators has been used to forecast economic activity.

4.2. Deterministic Cycle Models

The deterministic approach to the analysis of cyclic fluctuations is based on the assumption that cycles are regular and self-reproducing phenomena that can be described using mathematical models. Self-reproduction is due to the fact that during the development of the economy, forces arise that either accelerate or slow down its development. So, during an economic recovery, incomes grow, which, according to the acceleration principle, increase investments, and investments through the multiplier mechanism increase incomes even more. This process will continue as long as aggregate demand exceeds aggregate supply. When aggregate supply exceeds aggregate demand, prices will fall and income levels will decline. A decrease in income through the acceleration mechanism will reduce investments, which in turn, with the help of a multiplier, will further reduce income. The fall in income will continue as long as aggregate supply exceeds aggregate demand. As soon as aggregate demand exceeds aggregate supply, prices will rise and income will increase. According to J. Hicks, the upper limit of growth is the volume of GDP at full employment, and the fall in GDP is limited by the amount of depreciation.

4.2.1. Samuelson-Hicks business cycle model.

In this model, economic fluctuations are explained from the perspective of the Keynesian theory of aggregate demand, but the reasons for changes in aggregate demand itself are not considered. In the model, there is only a goods market operating in a closed economy:

.

Household consumption in the current period depends on income in the previous period, that is, there is a lag called Robertson:

.

Investments include autonomous investments, independent of income, and induced ones, depending on changes in income in previous periods of time (Lundberg lag):

where is the accelerator.

Based on these conditions, the main macroeconomic identity has the form:

where A=C a +I a +G – autonomous expenses.

From a mathematical point of view, the resulting identity is a linear finite-difference equation of the second order, the solution of which is uniquely determined under two initially specified conditions (Y t at t=0 and t=1). If autonomous expenditures are constant, the economy will be on a stationary trajectory, and the level of income will not change over time:

Consequently, reaching a stationary trajectory is determined by the formula:

To determine the impact of changes in autonomous expenses on the dynamics of the income level, it is necessary to get rid of heterogeneity and move from a finite-difference equation to a homogeneous one. This is achieved by taking the difference:

To solve this homogeneous equation, the so-called characteristic equation is used:

.

The roots of this equation are calculated using the formula:

and depend on the discriminant . Consequently, the dynamics of income is determined by the values ​​of the marginal propensity to consume and the accelerator.

If time tends to infinity and income tends to zero, then the equilibrium in the economy will be stable. In a stable equilibrium, an economy brought out of this state by an external shock always returns to it. The trajectory of the economy will be stable if the roots () are not equal to each other and range from zero to one . Therefore, the equilibrium condition is:

.

If, as time tends to infinity, income also tends to infinity, then the equilibrium in the economy will not be stable, and the condition for instability of development is:

.

Stable and unstable dynamics of economic development can be monotonous and oscillatory. The boundary between monotonic and oscillatory processes is determined based on the determinant:

Since the marginal propensity to consume ranges from zero to one () and the accelerator is positive, the second root in the solution should be discarded. As a result, the boundary between monotonic and oscillatory processes is determined by the condition:

Graphically this boundary is shown in the figure below.

Fig.4.3. The nature of income dynamics depending on the parameters of the multiplier-accelerator model

All combinations and that lie below the curve lead to an oscillatory process, and above the curve lead to a monotonic process. At and the trajectory of movement will be stable and monotonically converging (1st region), and when - unstable and monotonically diverging (1V region). At and the trajectory of movement will be stable with damped oscillations (11th region), and unstable with diverging oscillations (111th region).

The figure below shows the amplitudes of income fluctuations.

Fig.4.4. Possible options for income dynamics

The real economy corresponds to the values ​​of the marginal propensity to save and the accelerator, which are in the area of ​​111 and 1V, which corresponds to an unstable equilibrium. However, economic growth and the depth of decline have certain limits. Thus, economic growth cannot exceed the volume of GDP at full employment, and the depth of the decline cannot be less than the negative value of depreciation.

If autonomous expenditures constantly increase at a rate , then the basic macroeconomic identity takes the form:

Due to the multiplier effect, the equilibrium value of income will increase several times annually. Consequently, reaching a stationary trajectory is determined by the formula:

The first factor on the right side is the Hicks supermultiplier, which shows how much income will increase in year t if autonomous expenditures of the same year increase by one unit in excess of their exogenous growth at a rate of .

With the growth of autonomous investments, production capacity will also increase, and the upper limit of possible income fluctuations will accordingly increase:

.

As production capacity increases, depreciation charges will also increase (D):

.

When induced investment reaches its minimum value , then the total volume of autonomous expenses will be equal to:

Accordingly, the minimum income level is equal to:

and the lower limit of income fluctuations increases at a rate of 1+μ.

Thus, the Hicks supermultiplier gives the income fluctuation corridor a positive slope.

The Samuelson-Hicks model, although it has made enormous contributions to the research and understanding of the causes of the business cycle, is not always supported by empirical research.

4.2.2. T. Teves model

The model of the American economist T. Teves is a modified model of the Samuelson-Hicks business cycle, since it complements the goods market with the money market. The money market interacts with the goods market through the interest rate. In this case, investment demand depends not only on changes in income, but also on the interest rate:

The main macroeconomic identity in this case takes the form:

As you know, equilibrium in the money market is depicted by the LM model:

.

Substituting the interest rate into the investment equation, we obtain the following basic macroeconomic identity:

which is a second-order linear finite-difference equation. Just as in the Samuelson-Hicks model, if autonomous expenditures are constant, the economy will be on a stationary trajectory, and the level of income will not change over time:

Therefore, the formula for reaching a stationary trajectory has the form:

.

By calculating the differences, we can obtain a homogeneous equation:

,

which determines the dynamics of income after an increase in autonomous expenses, subject to the interaction of the goods market with the money market. The roots of this characteristic equation are calculated using the formula:

where is the ratio of the product of the elasticity of demand for money with respect to income and the elasticity of demand for investment with respect to the interest rate to the elasticity of demand for money with respect to the interest rate.

Depending on the discriminant The roots of this equation can be real or imaginary.

Using the determinant, one can determine the boundary between oscillatory and monotonic processes:

Graphically this boundary is shown in Fig. 4.5

Rice. 4.5. Boundary between monotonic and oscillatory trajectories

For D>0, the income dynamics will be monotonic, and for D<0 – колебательной. Условие устойчивости экономического равновесия определяется по модулю комплексного числа для колебательного процесса:

Therefore, when the system will be stable and when it will be unstable.

In the Teves model, compared to the Samuelson-Hicks model, the region of stable equilibrium is smaller. This decreases the larger the value of η.

The Teves model shows the ability of the central bank to influence the dynamics of economic conditions. If we assume that in the supply of money the central bank is guided by the volume of GDP of the previous period and the current interest rate, then the equilibrium in the money market will be expressed by the equation:

If we substitute the value of the interest rate into the main macroeconomic identity, we obtain the following equation:

.

Now the boundary between oscillatory and monotonic processes is determined by the equation:

.

Therefore, by selecting parameters a and b, the central bank can influence the nature of the development of the economic situation, but the cause of fluctuations remains exogenous changes in the goods market.

4.3 Theories of stochastic cycles

More reasonable and consistent with the reality of economic development are the theories of stochastic cycles, which state that the economic system obeys the law of random fluctuations. Therefore, the cause of cyclical development is random external impulses that do not have a certain periodicity. These impulses can throw the economy out of balance and cause valuable reactions throughout the economic system. Therefore, theories of stochastic cycles focus on impulses and the mechanism of their propagation, which depends on the structure of the economy. The influence of external shocks is considered from both Keynesian and neoclassical approaches.

One of the random impulses may be an unexpected change in the money supply. The American economist R. Hawtrey is considered the founder of the monetary concept of business cycles. In his opinion, the impetus of the business cycle is an increase in the supply of loans by the banking system, which leads to a decrease in interest rates, an increase in investment and aggregate demand. In turn, an increase in aggregate demand stimulates economic growth and higher prices. However, rising prices will cause the cost of borrowing to rise, and the economy will begin to move towards recession.

Nobel laureates M. Friedman and Kr. Simsa noted the high correlation between money supply and output and the unidirectional impact of monetary shocks on the real sector. Thus, in Russia in the first decade of the 21st century, the growth rate of the money supply in Russia was in the range of 35–50% per year, and the growth rate of nominal GDP was 15–25%, which indicated that the economy was saturated with money. Positive dynamics of nominal GDP occurred when the growth rate of money exceeded its growth rate of GDP, and conversely, a decrease in nominal GDP occurred when the money supply grew slower than nominal GDP (Fig. 4.6).

Fig. 4.6 Dynamics of growth rates of nominal GDP and M2 monetary aggregate in Russia

D. Laidler analyzed in detail the impact of the monetary impulse on the business cycle. His model describes the interaction of markets for goods and money in a closed economy without the participation of the state. The volume of goods produced depends on the degree of utilization of production capacity:

where Y f is the potential (natural) output volume;

ν – production capacity utilization factor.

The demand for money is a function of income and the price level:

.

The money supply (MS) is given exogenously. Equilibrium in the money market is achieved when the demand for money is equal to its supply:

.

Accordingly, the dynamic equilibrium in the money market is described by the equation:

,

where is the growth rate of money supply;

Inflation rate;

Rate of change in natural output volume;

Change in production capacity utilization rate.

Consequently, dynamic equilibrium in the economy is achieved when the change in the supply of money is equal to the change in production possibilities.

This model assumes that changes in the price level depend on expected inflation and capacity utilization:

,

where β characterizes the reaction of employment to an increase in the price level.

Inflation expectations are adaptive:

,

where is the forecast error correction factor.

Let's determine the expected rate of inflation acceleration:

.

If we substitute the expected rate of inflation acceleration into the equation for changes in the price level, we will ultimately obtain that the price level depends only on the coefficient of utilization of production capacity:

.

Therefore, in dynamic equilibrium:

.

If we prolagarithize this power equation, we obtain a homogeneous second-order differential equation:

Where - .

The equality of the differential equation is possible only when , which corresponds to the full use of production capacity. Since in dynamic equilibrium the rate of change in production volume is a constant value (y t =const), the rate of inflation growth will be directly proportional to the rate of growth of the money supply:

.

A deviation of the growth rate of money from the equilibrium rate will disrupt the dynamic equilibrium in the economy. Whether the transition to a new equilibrium state will occur depends on the properties of the differential equation.

If , then after the monetary impulse the economy, through damped market fluctuations, will move to a new dynamic equilibrium.

At monotonous development will occur.

4.4 Theory of real business cycles

In 2004, the Nobel Prize in Economics was awarded to the American scientists F. Kydland and E. Prescott for their work on the theory of business cycles. In their works, they proposed a number of new theoretical and methodological approaches to the study of cycles, called real business cycles(real business cycle theory). First of all, they showed that cycles can be studied using dynamic general equilibrium models. They further proved that these models correctly describe empirical patterns of long-term growth and can be calibrated.

The theory of real business cycles is a neoclassical theory, therefore it operates a competitive economy with price flexibility and optimal behavior of economic agents under conditions of rational expectations. If Keynesian theory connects short-term fluctuations in the economy with changes in aggregate demand, then the theory of real business cycles considers the main sources of economic fluctuations to be changes in the real conditions of the economy (changes in production technologies, natural conditions, world oil prices, the emergence of new products and raw materials, tax politics, etc.). Real business cycle theory combines the analysis of long-term economic growth with the analysis of short-term cyclical fluctuations. This theory argues that technological progress is not only a major factor in economic growth, but can also cause short-term cyclical fluctuations. Real shocks in this theory are contrasted with nominal shocks, which are associated with changes in the supply of money or demand for it. In the IS-LM model, real shocks affect the IS curve, and nominal shocks affect the LM curve.

The theory of real business cycles has internal mathematical rigor. Households and firms are assumed to behave rationally and make consumption and investment decisions based on expected future income. Therefore, they behave according to the permanent income hypothesis. At any given moment in time, the goods produced are used for consumption and investment:

The technology of firms is described by the neoclassical production function:

.

The amount of operating capital depends on its disposal and investment in the previous period of time:

The goal of the company is to maximize profits:

Since firms operate in conditions of perfect competition, the condition for obtaining maximum profit is that the value of the marginal product of capital is equal to the price of capital (real interest rate), and the value of the marginal product of labor is equal to the price of labor (real wage):

Technological shocks cause unexpected fluctuations in the marginal productivity of factors of production and, accordingly, their costs. A positive technology shock will cause them to increase, and a negative one will cause them to decrease. An increase in the marginal productivity of capital causes an increase in investment and aggregate demand, as well as in the real interest rate in the current period. New investments will increase the amount of functioning capital and, accordingly, aggregate supply in the next period.

Fig. 4.6 Impact of a positive technology shock on macroeconomic equilibrium

An increase in the marginal productivity of labor leads to an increase in the demand for labor and an increase in real wages. To analyze the impact of real wage growth on labor supply, the household utility function is used. Under conditions of perfect competition, a country has a large number of households that seek to maximize their utility function and make a choice between consumption (C) and leisure (l). The household utility function has the form:

,

where E is the wait during the time period t;

β – discount factor reflecting the preferences of the individual, 0<β<1;

Strictly monotone doubly differentiable, concave utility function.

Household income consists of wages and income on capital and its budget constraint has the form:

.

To optimize the utility function of households under budget constraints, the Lagrange equation is used:

Since the marginal rate of substitution of leisure for labor is equal to the real wage, an increase in wages will induce households to work more and rest less, which will be reflected in an increase in employment and aggregate supply. An increase in real wages will also cause an increase in aggregate demand. However, households understand that their incomes will not always be high, so they will spend only part of the additional income on consumption and save the majority. Consequently, households tend to spend an approximately constant amount of money on consumption every year, regardless of the amount of current income, or to “smooth” consumption.

Households' choice between work and leisure is influenced by the real interest rate. Based on I. Fisher's theory of intertemporal choice, an increase in the interest rate, firstly, makes today's labor more attractive compared to the future, so households will increase the supply of labor. Second, an increase in the interest rate increases the level of future income, since savings made today will bring more income in the future, so the supply of labor will increase. At the same time, an increase in the real interest rate will reduce the investment demand of firms and the consumer demand of households for goods purchased on credit. Consequently, there may be a decrease in aggregate demand.

To match the real business cycle model to the actual state of affairs in the economy, Kydland and Prescott used a calibration procedure. Calibration consisted of assigning numerical values ​​to the exogenous parameters of the model that corresponded to real values ​​over a long period of time. This calibration made it possible not to take into account deviations from the average values, which were due to the cyclical nature of economic development.

The developed models of real business cycles, in general, correspond to the laws of economic dynamics, and most of the fluctuations in macroeconomic indicators correspond to those predicted. Based on the optimal behavior of households and investors under conditions of rational expectation, it was explained why fluctuations in real consumption are less than fluctuations in real GDP, and why investment is greater. It follows from the theory of real business cycles that low rates of economic growth may be a consequence of temporarily low rates of technological development, and not the result of a “market fiasco.” This leads to a recommendation to minimize government intervention in the economy.

However, in the theory of the real business cycle there was no proper place for the financial sector of the economy. This sector, on the one hand, depends on the real sector of the economy, and on the other hand, through fluctuations in stock prices and prices of financial assets at the micro level, it influences the decisions of economic agents about investments, dividends and borrowing, which affects the efficiency of business processes.

4.5 Political business cycles

Since the 70s of the twentieth century, economists began to study the impact of political structures on the economy. This has led to theories political business cycles(political business cycle theory), which prove that the impact of the state on the economy is a factor that increases its instability. Modeling of political business cycles is based on the following premises:

In order to win the next election, politicians strive to get the largest number of votes;

Governments may manipulate economic policy to improve their chances of re-election;

Political parties are ideologically distinct and represent different segments of the population;

Voters have preferences regarding economic outcomes that are reflected in their voting behavior;

Decisions of politicians and voters are made under conditions of asymmetric information.

The development of social production, which depends on many factors, is not uniform and continuous. In some periods, the growth of total production occurs very quickly, in other years it is slower, and sometimes there is even a decline. Thus, the economic development of countries does not occur evenly, i.e. it is characterized by macroeconomic instability, which manifests itself in unemployment and inflation in the form of cyclical development. The latter presupposes a unified process of economic development in which phases of crises and booms naturally alternate. Moreover, the general oscillatory movement of business activity consists of several components with different periods and mechanisms of oscillation. This process takes place around the equilibrium position, which is considered the normal state of the economy. Therefore, a cycle can be called wave-like oscillations of various durations around an equilibrium position. Or, in other words, the business cycle is the period of time between two identical trends in economic activity over several years.

Individual economic cycles differ from each other in duration and intensity, but they all have the same phases: crisis (recession), depression (stagnation, low point of decline), recovery (rise, expansion), peak (boom, top of the cycle) .

The main phases of the cycle are crisis and rise and their corresponding points - the maximum decline as the lowest point and the peak - the top of the rise.

A crisis characterized by a sharp reduction in business activity - there is an excess of goods compared to the demand for them from consumers, which leads to lower prices. Since the created goods do not find sales, commodity producers curtail production, the number of unemployed increases sharply, and household incomes decrease, which causes a further reduction in demand. As a result, many entrepreneurs become insolvent and fail. The crisis is intensified by the loss of trust of market economy subjects in each other and shocks to the credit system.

What is distinctive is the crisis that took place in England in 1825. Then it erupted again in England and engulfed the United States (1836). The world crisis first occurred in 1857. Later, such crises began to recur at intervals of 8–10 years. The crises of 1900–1903 and 1929–1933 were characterized by the greatest destructiveness. Crisis of 1929–1933 began with the stock market crash on Black Tuesday, October 29, 1929. Output in countries affected by the economic downturn fell by 44%. World trade turnover fell by 61%. The number of unemployed people reached 40 million (every fourth person was unemployed). After the Second World War, the economies of developed countries experienced recessions in 1948–1949, 1953–1954, 1960–1961, 1980–1984.

The crisis follows depression, which can be long-lasting. During this phase, production and employment, having reached their lowest levels, remain virtually unchanged. The “excess” of goods is gradually being absorbed. The economy remains at a high level of unemployment. The supply of loan capital increases, but since the demand for it from business is low, the loan interest rate falls. Despite the listed negative aspects, many economists consider this phase of the economic cycle as preparation for the subsequent recovery: here the dissemination of technical achievements in the national economy takes place, the structure of production changes, which is freed from unprofitable enterprises and unpromising industries. The period of depression is characterized by a state of uncertainty and disorderly actions of business entities, especially trade intermediaries and stock agents. Even after the recession ends, entrepreneurs' trust in each other is difficult to restore.

However, economic conditions are gradually stabilizing, and the next phase of the cycle begins - revival. At first, it is characterized by a slight gradual increase in capital investment, production volumes, employment, prices, and interest rates. The conditional boundary of this phase can be drawn at the point where macroeconomic indicators reach pre-crisis levels. Then a rapid increase in production begins. Unemployment is reduced to a minimum. The demand for loan capital and the loan interest rate are growing. Rapid development continues until the economy reaches its highest point of development and the cycle ends.

Along with general cyclical crises affecting all spheres of the national economy, partial crises, covering any one area of ​​the economy, for example credit relations. There are sectoral crises that extend to individual sectors of industry, agriculture, and transport. Structural crises (energy, raw materials, food) are caused by large imbalances in the development of the national economy. At the same time, cyclical development, despite its oscillatory movements, reveals a strategic growth trend, i.e. has a forward direction of movement.

The reasons causing changes in economic activity of production over time are studied by the theory of business cycles, which is sometimes called the theory of economic conditions. Today there are many similar theories. However, the nature of the cycle is still one of the most controversial and poorly understood problems. Researchers involved in the study of market dynamics can be divided into those who do not recognize the existence of periodically repeating cycles in social life, and those who take a deterministic position and argue that economic cycles manifest themselves with the regularity of ebbs and flows.

Representatives of the first direction, to which the most authoritative scientists of the modern Western neoclassical school belong, believe that cycles are the result of random influences (impulses or shocks) on the economic system, which causes a cyclical response model, i.e. cyclicality is the result of the impact on the economy of a series independent impulses. The foundations of this approach were laid in 1927 by the Soviet economist E. E. Slutsky (1880–1948). After 30 years, this direction has received wide recognition in the West.

Representatives of the second direction tend to consider the cycle as a kind of fundamental principle, an elementary indivisible “atom” of the real world. A cycle in this interpretation is a special, universal and absolute formation of the material world. The structure of the cycle is formed by two opposing material objects, which are in the process of interaction in it (Yu. N. Sokolov. The cycle as the basis of the universe. Stavropol, 1995).

Currently, statisticians and economists are not able to give accurate forecasts of economic conditions, but can only determine its general trend. This is explained by the fact that, firstly, it is difficult to take into account all factors, especially during periods of economic instability and political upheaval. Secondly, the international environment has a significant impact on the national economy. Thirdly, even having correctly identified a trend, it is difficult to predict the exact dates of the phases and change economic policy in time. Finally, the actions of entrepreneurs can aggravate undesirable deviations in the market situation.

Modern social science knows more than a thousand types of economic cyclicality. The table shows the six most frequently encountered ones, but economics operates primarily with the first four of them.