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New approaches to business cycle theory in current economic science

Author

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  • Monica DOBRESCU

    (Bucharest Academy of Economic Studies)

  • Claudia Elena PAICU

    (Bucharest Academy of Economic Studies)

Abstract

In modern economies, current research generally acknowledges that the central issues in macroeconomics are essentially the same as those identified by Keynes in the General Theory of Employment, Interest and Money. One way or the other, economists are trying to address the same macroeconomic issues that they did seven decades ago: How can we account for the different growth rates and various fluctuations observed in national economies? Which are the economic policies most suitable to solve the issues of growth and cyclic behavior? Both the new classicals and the new Keynesians have made considerable progress within their research paradigms: to explain economic fluctuations, the new classicals focus on technological perturbations, the intertemporal substitution of leisure and real business cycles; on the other hand, the new Keynesians speak in terms of monopolistic competition, menu costs or efficiency wages. On the whole, the new classicals believe that the business cycle can best be understood within the market-clearing model, whereas the new keynesians believe that business fluctuations are due to certain market failures of various sorts. The present paper focuses on the main directions of research of the new classical school on the business cycle, given that the theoretical progress in this field has been significant and relevant for economic policy during the past four decades.

Suggested Citation

  • Monica DOBRESCU & Claudia Elena PAICU, 2012. "New approaches to business cycle theory in current economic science," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(7(572)), pages 147-160, July.
    • Handle: RePEc:agr:journl:v:7(572):y:2012:i:7(572):p:147-160
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    Citations

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    Cited by:

    1. Kenny S, Victoria, 2019. "The effect of real shocks on business cycle fluctuations. A Bayesian panel vector autoregressive approach," MPRA Paper 95716, University Library of Munich, Germany.
    2. Escañuela Romana, Ignacio, 2016. "Azar, Determinismo e Indecidibilidad en la Teoría del Ciclo Económico [Randomness, Determinism and Undecidability in the Business Cycle Theory]," MPRA Paper 72978, University Library of Munich, Germany.
    3. Krume Nikoloski & Ognen Aleksoski & Borka Petrusheva, 2015. "Economic Thought Through The Prism Of New Keynesian Economics," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 17-21, January.
    4. Ignacio Escañuela ROMANA, 2016. "Randomness, Determinism and Undecidability in the Economic Cycle Theory," Journal of Economics and Political Economy, KSP Journals, vol. 3(4), pages 638-658, December.

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