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Can sticky consumption cause business cycles?

Author

Listed:
  • James E. McClure

    (Ball State University)

  • David Chandler Thomas

    (Ball State University)

Abstract

Sticky aggregate consumption is a demonstrable phenomenon in economies throughout the world, but to our knowledge it has not yet been incorporated into capital structure macroeconomics. Doing so suggests an explanation for business cycles. On the heels of a technological advance, sticky consumption facilitates increased savings and lower real interest rates. These lower rates lead to accelerating elongations in the capital structure. Even though such elongations facilitate more rapid economic growth, if duplicative overinvestment in research and development occurs, economic contraction will follow the exposure of such error.

Suggested Citation

  • James E. McClure & David Chandler Thomas, 2018. "Can sticky consumption cause business cycles?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 31(1), pages 51-72, March.
    • Handle: RePEc:kap:revaec:v:31:y:2018:i:1:d:10.1007_s11138-016-0371-y
    DOI: 10.1007/s11138-016-0371-y
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    References listed on IDEAS

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    Cited by:

    1. James E. McClure & David Chandler Thomas, 2019. "The Impact of New-Product R&D on the Circular Flow," The American Economist, Sage Publications, vol. 64(1), pages 45-59, March.

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    More about this item

    Keywords

    Sticky consumption; Business cycle; Hysteresis; Entrepreneur; Capital structure; Economic growth; Sequestered capital;
    All these keywords.

    JEL classification:

    • E14 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Austrian; Evolutionary; Institutional
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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