Capital Demand Driven Business Cycles: Mechanism and Effects
| Autor: | Karl Naumann-Woleske, Michael Benzaquen, Maxim Gusev, Dimitri Kroujiline |
|---|---|
| Přispěvatelé: | Laboratoire d'hydrodynamique (LadHyX), École polytechnique (X)-Centre National de la Recherche Scientifique (CNRS), New Approaches to Economic Challenges (NAEC), Organisation for Economic Cooperation and Development, Capital Fund Management (CFM), Capital Fund Management, LGT Capital Partners |
| Jazyk: | angličtina |
| Rok vydání: | 2021 |
| Předmět: |
Community and Home Care
History 050208 finance General Economics (econ.GN) Polymers and Plastics 05 social sciences Industrial and Manufacturing Engineering [SHS]Humanities and Social Sciences FOS: Economics and business 8. Economic growth 0502 economics and business 050207 economics Business and International Management Economics - General Economics |
| Popis: | We develop a tractable macroeconomic model that captures dynamic behaviors across multiple timescales, including business cycles. The model is anchored in a dynamic capital demand framework reflecting an interactions-based process whereby firms determine capital needs and make investment decisions at the micro level. We derive equations for aggregate demand from this micro setting and embed them in the Solow growth economy. As a result, we obtain a closed-form dynamical system with which we study economic fluctuations and their impact on long-term growth. For realistic parameters, the model has two attracting equilibria: one at which the economy contracts and one at which it expands. This bi-stable configuration gives rise to quasiperiodic fluctuations, characterized by the economy's prolonged entrapment in either a contraction or expansion mode punctuated by rapid alternations between them. We identify the underlying endogenous mechanism as a coherence resonance phenomenon. In addition, the model admits a stochastic limit cycle likewise capable of generating quasiperiodic fluctuations; however, we show that these fluctuations cannot be realized as they induce unrealistic growth dynamics. We further find that while the fluctuations powered by coherence resonance can cause substantial excursions from the equilibrium growth path, such deviations vanish in the long run as supply and demand converge. 51 pages, 19 figures |
| Databáze: | OpenAIRE |
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