Macroeconomic instability

Macroeconomic stability is more a coincidence than a regularity. Practice shows that there is no balance in the economy. After the period of prosperity and development, a period of recession is inevitably followed, accompanied by unemployment. And economic cycles and their types differ in time intervals and other signs. So, in duration they are short, medium and long.

Short cycles were identified by Joseph Kitchin, an English economist. He associated them with fluctuations in gold reserves. Periodicity, which set Kitchin, is forty months.

Wesley Mitchell, founder of econometrics, believed that the reason for the short cycles lies in the monetary turnover, and agreed with the previous periodicity.

In fact, these cycles are associated with a lack of equilibrium in the consumption market. Changes in the credit sphere are their cause, and therefore they are manifested in the form of credit crises.

In the second half of the 19th century, Clement Juglar, a French economist, studied average cycles. Their cause, he also saw in the field of credit. Clement Zhuglyar determined the periodicity of average cycles in eight to ten years.

To the same type of cycles are also construction cycles, identified by Simon Kuznets. He associated them with a periodic (once every fifteen or twenty years) renovation of housing.

Long (or large) cycles exist because of changes in infrastructure, energy sources and basic technologies. Otherwise, these cycles are also called the Kondratieff cycles, the surname of the scientist from Russia - Nikolai Kondratiev. He studied the dynamics of coal, steel, tin production, as well as the average level of wages, prices, foreign trade turnover and other indicators in the United States and some Western European countries in 140 years (from the last two decades of the 18th century to the twenties of the 20th century). Kondratev conducted econometric studies and determined that long cycles last 54-55 years, while having an ascending and descending phase.

The downward phase, when the main technologies and technological structures change, lasts from 20 to 25 years.

The rising phase, when the society is booming economy, technology and science, lasts from 25 to 30 years.

There is no equilibrium in the economy for many reasons. First, macroeconomic instability largely depends on such a factor as the technical equipment of production. Frequent changes provoke short periods of recession and recovery, and those that are produced less often (for example, the construction of new bridges and other structures) make these periods longer.

But macroeconomic instability is caused not only by this factor. To the problem of the periodicity of such fluctuations in the economy, none of economists of the 19-20th centuries remained indifferent. Trying to understand the reasons for this phenomenon, they created many different theories. The main ones explain the instability of the economy as follows.

1. According to the first theory, cyclicity is generated by the effect of the accelerator and multiplier effect.

2. Supporters of the theory of the political business cycle believe that macroeconomic instability arises as a consequence of the actions of politicians in the sphere of money, budget, loans and taxes.

3. The advocates of the theory of the equilibrium economic cycle see the reasons for the trend fluctuation in the short-term time period.

4. Scientists who advance the theory of a real business cycle assume that macroeconomic instability arises from sharp changes in different sectors of the economy, that is, when production technologies change dramatically.

Each of these points of view to some extent correctly indicates the causes of fluctuations. But today there is no general theory that all economic schools could recognize .