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The True Cause of Business Cycle

Author

Listed:
  • Ting Chiung

    (Michigan State University, East Lansing)

Abstract

Cause and impulse are different. Cause creates an economic mechanism in which impulses propagate effect. If we remove cause, impulses propagate nothing. In credit economy, I derive an economic mechanism from economic agents’ budget constraint interactively in which effects arising from impulses are co­movement. This economic mechanism does not exist in non­credit economy while all impulses are active. Thus, loan is the true cause of business cycle. Business cycle is inherent in credit economy. If we remove loan from the world we live in, we eliminate business cycle completely and permanently.

Suggested Citation

  • Ting Chiung, 2012. "The True Cause of Business Cycle," European Journal of Business and Economics, Central Bohemia University, vol. 4(0), pages 47-511:4, September.
    • Handle: RePEc:aad:ejbejj:v:4:y:2012:i:0:p:47-51
    DOI: 10.12955/ejbe.v4i0.157
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    Keywords

    Business CycleCause; Credit Cycle;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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