Author : Mr. Marco Gross
Publisher : International Monetary Fund
ISBN 13 : 1513571672
Total Pages : 37 pages
Book Rating : 4.5/5 (135 download)
Book Synopsis Beautiful Cycles: A Theory and a Model Implying a Curious Role for Interest by : Mr. Marco Gross
Download or read book Beautiful Cycles: A Theory and a Model Implying a Curious Role for Interest written by Mr. Marco Gross and published by International Monetary Fund. This book was released on 2021-03-05 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Where do economic cycles come from? This paper contemplates an utmost minimalistic model and underlying theory that rest on two assumptions for letting them emerge endogenously: (1) the presence of interest-bearing debt; and (2) a degree of downward nominal wage rigidity. Despite its parsimony, the model generates well-behaved, self-evolving limit cycles and replicates six essential empirical facts: (1) booms are long- while recessions short-lived; (2) leverage is procyclical; (3) firm profit and wage shares in GDP are counter- and procyclical, respectively; (4) Phillips curves are downward-sloping and convex, and Okun’s law relation is replicated; (5) default cascades arise endogenously at the turning points to recessions; (6) lending spreads are countercyclical. One can refer to the model as being of a Dynamic Stochastic General Disequilibrium (DSGD) kind.