Munich Personal RePEc Archive Are business cycles inevitable?

The simulation model of business cycles emergence is proposed. In the first section a preliminary model of well known hog’s cycle is presented. The hog’s cycle is used as a metaphor for more general model of business cycles, which is presented in the second section. Emergence of fluctuations requires a tuning of numerous factors (the investment and price delays, the growth rate of the market, the capital productivity growth rate, capital depreciation rate, elasticity of demand). It turns out that the greater the market growth rate and the more elastic (competitive) market the more probably is that the fluctuations are damped. We may venture to propose a kind of recipe to avoid (or at least to delimit) economic fluctuations: we ought to create friendly regulatory conditions for entrepreneurs to ensure highest potential long term growth rate and to minimize investment delays. Fluctuations and cyclical behaviour are observed in majority of socioeconomic processes; the literature on this subject is enormous and has its own long history. It is impossible (and in fact not necessary) to make a review of literature in a short paper, therefore we confine the introductory remarks to state only the main points on former work done by different authors related to the presented model. The four early authors working on empirical and theoretica