| Creators: |
Klinkova, Galiya and Grabinski, Michael |
| Title: |
Business Cycles explained by Instability |
| Item Type: |
Article or issue of a publication series |
| Journal or Series Title: |
Theoretical Economics Letters |
| Page Range: |
pp. 1423-1431 |
| Additional Information: |
Open Access |
| Date: |
24 September 2025 |
| Divisions: |
Wirtschaftswissenschaften |
| Abstract (ENG): |
Business cycles (a periodic change of e.g. GDP over five to ten years) exist, but a proper explanation for it is still lacking. Here we extend the well-known NAIRU (non-accelerating inflation rate of unemployment) model, resulting in a set of differential equations. However, the solution is marginal stable. Therefore, we find a natural sinusoidal oscillation of inflation and unemployment just as observed in business cycles. When speculation is present, the instability becomes more severe. So we present for the first time a mathematical explanation for business cycles rather than a description. The steering of central banks by setting interest rates to keep inflation stable and low needs some overhaul. One has to distinguish between real monetary instability and the one caused naturally by business cycles. |
| Forthcoming: |
No |
| Language: |
English |
| Uncontrolled Keywords: |
Business Cycles, Instability, Differential Equations, System Dynamics |
| Link eMedia: |
Download |
| Citation: |
Klinkova, Galiya and Grabinski, Michael
(2025)
Business Cycles explained by Instability.
Theoretical Economics Letters, 15 (6).
pp. 1423-1431.
ISSN 2162-2086
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