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Critical Analyses of Economic Cycles Theories Критичний Аналіз Теорій

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Critical Analyses of Economic Cycles Theories Критичний Аналіз Теорій 10 Класичний приватний університет UDC 330.33/330.83(043.3)(100) Gaidey D.A. Assistant of the International Economics Department, Donetsk National University CRITICAL ANALYSES OF ECONOMIC CYCLES THEORIES КРИТИЧНИЙ АНАЛІЗ ТЕОРІЙ ЕКОНОМІЧНИХ ЦИКЛІВ ANNOTATION Statement of the problem. The increas- This paper provides analyses of economic cycles ing frequency and severity of financial theories. It examines into economic cycles according to and economic crises over the past three their periodicity, explores the theoretical background and formulates the basics of the mechanism of the Kitchin decades have raised important questions inventory cycles of 3-5 years, the Juglar fixed investment about background of such emergencies. cycles of 7-11 years, the Kuznets infrastructural invest- Explanation the externalities of upturns ment cycles of 15-25 years), the Kondratiev long tech- and downturns in world economy could be nological cycles of 45-60 years. It studies different clas- provided with understanding the nature sifications of economic cycles and covers main causes, of cyclic economic transformations. Rep- which drive periodical fluctuations in business activity. Keywords: the Kitchin inventory cycle, the Juglar resentation the mechanism of cyclic fluc- fixed investment cycle, the Kuznets infrastructural in- tuation of economy is important tool for vestment cycle , the Kondratiev wave or long technolog- effective economic policy, which enables ical cycle, expansion, stagnation, recession, economic government to forecast possible scenarios growth, economic fluctuation. for economic development and work out АНОТАЦІЯ efficient managerial strategy. У статті запропоновано аналіз теорій економічних Analyses of latest studies and publi- циклів. У роботі розглянуто економічні цикли різної тривалості, досліджено теоретичні засади та базові cations.The foundation of cycles theories механізми циклів Китчина тривалістю 3-5 років, was settled by Joseph Kitchin, Simon циклів Жюгляра тривалістю 7-11 років, циклів Kuznets, Nikolai Kondratiev, Joseph Кузнеця тривалістю 15-25 років, довгих хвиль Shumpeter, Clйment Juglar. Today the Кондратьєва тривалістю в 45-60 років. У дослідженні attempts to analyze the nature of business запропоновано різні класифікації економічних циклів . і вивчено основні причини, які їх призводять до cycles represented in works of A V Koro- . періодичних коливань ділової активності. taev, S V Tsirel, A F Burns, W C Mitchell, Ключові слова: короткостроковий цикл Китчина, A. Sullivan, S. M. Sheffrin, J. W. Forrester, середньостроковий цикл Жюгляра, ритм Кузнеця, M. Bormotov, A. Telecote and others. At хвиля або довгий технологічний цикл Кондратьєва, the same time despite the intense attempts поширення, стагнація, спад, економічне зростання, коливання в економіці. of economist to give proper explanation to mechanisms of cyclic development this АННОТАЦИЯ В статье представлен анализ теорий экономических question is still in need for scientific con- циклов. В работе рассмотрены экономические циклы sideration. разной длительности, исследованы теоретические ос- The objective of the article is to explore новы и базовые механизмы циклов Китчина длительно- the theoretical background and formulates стью 3-5 лет, циклов Жюгляра длительностью 7-11 лет, the basics of the mechanism of economic циклов Кузнеца длительностью 15-25 лет, длинных волн Кондратьева периодичностью в 45-60 лет. В исследова- cycles. нии предложены различные классификации экономиче- Unsolved aspects of the problem. Due ских циклов и изучены основные причины, которые при- to significant variability of display areas, водят к периодическим колебаниям деловой активности. scope and duration of economic cycles Ключевые слова: краткосрочный цикл Китчина, there is consistent approach to under- среднесрочный цикл Жюгляра, ритм Кузнеца, волна standing the nature periodical economic или длинный технологический цикл Кондратьева, распространение, стагнация, спад, экономический fluctuations. In addition, there is no sin- ЕКОНОМІЧНА ТЕОРІЯ ТА ІСТОРІЯ ЕКОНОМІЧНОЇ ДУМКИ рост, колебания в экономике. gle concept of views on the problems of Випуск 1(01) 2017 Приазовський економічний вісник 11 the interaction between dynamic fluctua- In the mid-20th century, J. Schumpeter tions in economic activity with the inno- proposed a typology of business cycles vative development of the world economic according to their periodicity, so that a system, which explains the need for fur- number of particular cycles were named ther study of the issue. after their discoverers or proposers: Presentation of the basic materials. – the Kitchin inventory cycle of Severe economic fluctuations which had 3-5 years; recently hit the entire world economy – the Juglar fixed investment cycle of after relatively prosperous decades despite 7-11 years (often identified as ‘the’ busi- numerous institutional efforts to control ness cycle); them have recalled an interest to the the- – the Kuznets infrastructural invest- ory of economic cycles. Historical data on ment cycle of 15-25 years (after Simon main economic indexes and academic evi- Kuznets also called building cycle); dence show that recurrent fluctuations in – the Kondratiev wave or long techno- the pace of economic growth are consist- logical cycle of 45-60 years (after Nikolai ent over time. Technological revolutions Kondratiev) [3, 106]. and worldwide implementation of basic Kitchin cycle is a short business cycle inventions are necessarily accompanied by of about 40 months discovered in the the processes of creative destruction or – 1920s by Joseph Kitchin. sanitation of the economy, which cause This cycle is believed to be accounted long term economic cycles which appear to for by time lags in information move- be predictable but practically unavoidable. ments affecting the decision making of The term business cycle (or economic commercial firms. Firms react to the cycle) refers to economy-wide fluctuations improvement of commercial situation in production or economic activity over through the increase in output through several months or years. These fluctu- the full employment of the extent fixed ations occur around a long-term growth capital assets. As a result, within a cer- trend, and typically involve shifts over tain period of time (ranging between a time between periods of relatively rapid few months and two years) the market economic growth (expansion or boom), and gets ‘flooded’ with commodities whose periods of relative stagnation or decline quantity becomes gradually excessive. (contraction or recession) [1, 15]. The demand declines, prices drop, the These fluctuations in economic activity produced commodities get accumulated are usually measured by the growth rate in inventories, which informs entrepre- of real gross domestic product and despite neurs of the necessity to reduce output. being recurrent they do not follow any However, this process takes some time. strict harmonic pattern. It takes some time for the information The widely accepted definition of busi- that supply significantly exceeds demand ness cycles refers to Arthur F. Burns’ and to get to the businesspeople. As it takes Wesley C. Mitchell’s definition: «Business entrepreneurs time to check this infor- cycles are a type of fluctuation found in mation and to make the decision to the aggregate economic activity of nations reduce production, time is also necessary that organize their work mainly in busi- to materialize this decision (these are ness enterprises; a cycle consists of expan- the time lags that generate the Kitchin sions occurring at about the same time cycles). Another relevant time lag is the in many economic activities, followed by lag between the materialization of the similarly general recessions, contractions, afore mentioned decision (causing the and revivals which merge into the expan- capital assets to work well below the level sion phase of the next cycle; in duration, of their full employment) and the decrease business cycles vary from more than one of the excessive amounts of commodities year to ten or twelve years; they are not accumulated in inventories. Yet, after divisible into shorter cycles of similar this decrease takes place one can observe characteristics with amplitudes approxi- the conditions for a new phase of growth mating their own» [2, 8]. of demand, prices, output, etc. [4, 10]. 12 Класичний приватний університет Juglar cycle is a fixed investment cycle According to the innovation theory, of 7 to 11 years identified in 1862 by Kondratiev waves arise from the bunch- Clement Juglar. Within the Juglar cycle ing of basic innovations that launch tech- one can observe oscillations of invest- nological revolutions that in turn create ments into fixed capital and not just leading industrial or commercial sectors. changes in the level of employment of the Kondratiev’s ideas were taken up by fixed capital (and respective changes in Joseph Schumpeter in the 1930s. The the- inventories), as is observed with respect to ory hypothesized the existence of very Kitchin cycles. 2010 research employing long-run macroeconomic and price cycles, spectral analysis confirmed the presence originally estimated to last 50-54 years. of Juglar cycles in world GDP dynamics There are several modern timing ver- [4, 11]. sions of the cycle although most are based Kuznets swing is a claimed medi- on either of two causes: one on technology um-range economic wave with a period and the other on the credit cycle. of 15–25 years found in 1930 by Simon Additionally, there are
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