An Economic Cycle Model and the Current Crisis
medium line of production volume, where repeating phases of rise and decrease can be specified
.In the model that we propose below we have tried to briefly describethe main features of medium-term cycles of business activity, or businesscycles (7–11 years)
that are also known as Juglar cycles after the prominent19
-century French economist Clement Juglar (1819–1905), who investigatedthese cycles in detail (Juglar 1862, 1889).
On some approaches of economic scienceto the problem of cyclicity and economic crises
Juglar investigated fluctuations of prices, discount rates and gold reserves of banks in France, England, and the USA and showed their correlation withcycles of increasing business activity, investments (and speculations), andemployment (Juglar 1862, 1889). The first edition of his book was published in1862. In the Introduction he wrote: "It appears that crises, like diseases, are oneof the conditions of the existence of those societies where trade and industry are prevalent. One can predict them, alleviate them, delay them up to a certainmoment, one can facilitate the recovery of economic activities; but it has turnedto be impossible to eliminate them notwithstanding all the possible methods thathave been applied" (
1862: vii). Juglar's most important achievement lay in presenting substantial evidence that crises were periodical,
in support of "thelaw of crises' periodicity". According to this law, crisis is preceded by epochs of recovery, well-being, and price growth, which are followed by years of pricedecrease and trade slowing down that bring economy into a depressed state (
1889: xv). It is namely with Juglar's contribution to analysis of periodical crisesthat the transition of economics as a whole from crisis theory to business-cycletheory is frequently connected (Besomi 2005: 1).Thus, crisis does not occur randomly (it is erroneous to ascribe itsoccurrence to random factors).
It is preceded by an intensive increase in business activities and prices, which sometimes allows one to predict a crisis in
Many economists maintain that business cycles are quite regular with the characteristic period of 7–11 years. However, some suggest that economic cycles are irregular (see,
Fischer,Dornbusch, and Schmalensee 1988). As we suppose, comparative regularity of business cycles isobserved rather at the World System scale than in every country taken separately. Thiscorroborates the important role of exogenous factors for the rise and progress of business cycles(for more detail see below).
Medium-term cycles (7–11 years) were first named after Juglar in works by Joseph Schumpeter,who developed the typology of different-length business-cycles (Schumpeter 1939, 1954; see alsoKwasnisсki 2008).
Notwithstanding the belief of some influential modern economists in the contrary (see,
,Zarnowitz 1985: 544–568; Mankiw 2008: 740).