Business Cycles Creation : Some Historical and Theoretical Perspectives

Historically, generalization about economic fluctuations in an economic system over extended periods of time has proved to be difficult. Yet, it has been even more difficult to generalize across economic systems. In a historical setting, there are many theories offered to explain the creation of business cycles. In this study it is argued that the business cycle is not caused by a single factor but by a multiplicity of factors, therefore, such competing theories constitute special cases of the business cycle. This study maintains that there are families of business cycles, with each family representing a related set of economic systems. Given a family approach to economic systems, then it is conceivable that a general theory can be developed for each family of economic systems by grouping factors identifiable with particular sets of economic systems. Data from the United Nations for 137 countries were used to establish a classification scheme for families of economic systems. US time series data were examined to assess the plausibility of the general theory for one family of economic systems as advanced in this study