Business Cycle Model Literature & Language Essay Paper (Essay Sample)

5810250-533400
Business Cycle Model
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Executive Summary
The business cycle model refers to the fluctuations that the Gross Domestic Product of an economy goes through over a long-term or extended amount of time. Through the model, it is possible to determine the length of the business cycle. In this case, the RBCM business cycle model equation was used to incorporate and the reason for this is that it focuses mainly on business managers and marketers. Real Business Cycle Model (u (c t/t; c t/t+1) = ln (c t/t) + ln (c t/t+1), the second model used was Social Planner Model which in this case u is the average age of the consumer, c t/t is the consumption rate of a person over a given amount of time that is represented by t. The number 1 represents each additional stage in the business cycle (Yt = Ct + It = AtK α t−1N 1−α t) where Kt = It + (1 − δ) Kt−1.The above formula is for the social planner’s model/problem. The formula is lagrangian and this is because it involves a series of values that are got from picking various labor and consumption figures. It is imperative to note that this formula satisfies various constraints in the business cycle. In combination of the two formulas the result is revealed to be AtK α t−1N 1−α t = Ct + Kt − (1 − δ)Kt−1 FOC Model U(Ct) − V(Nt) + λt AtK α t−1N 1−α t − Ct − Kt + (1 − δ) Kt−1 = +βEt λt+1 At+1K α t N 1−α t+1 + (1 − δ).Current and intermediate conditions are initially presented in the early stages of the business cycle model and this is identified as the First Order Conditions. Subsequently, the time-t variables fail to reflect again. Consequently, the FOCs that stand for the time-t variable figures are composed of discerning this equation with reverence to these figures that are identified as variables and identifying the derivatives that equal zero. The study employed three theories that are Keynesian Theory, Credit/debit Cycle Theory, and Product Based Cycle Theory. In conclusion, the business cycle model has been in existence for the better part of the last two centuries and business people have come to comprehend the various stages involved in the cycle. People in the business fields of marketing and management feel the greatest blow every time that the market dynamics change. The results revealed that procyclical variables have a strong positive correlation since it increases at the times of booms and decreases at the time of recession. The negative correlation is experienced with countercyclical variables associates. A cyclical correlation, close to zero implies that there is no systematic relationship to the business cycle. Therefore, we can confirm that productivity is slightly procyclical.It is recommended that marketers among other business people stay prepared in the corporate environment.
TABLE OF CONTENTS TOC \o "1-3" \h \z \u LIST OF FIGURES PAGEREF _Toc61872108 \h ivLIST OF TABLES PAGEREF _Toc61872109 \h vIntroduction PAGEREF _Toc61872110 \h 1Background PAGEREF _Toc61872111 \h 1Literature Review PAGEREF _Toc61872113 \h 4Stage 1: Expansion PAGEREF _Toc61872114 \h 4Stage 2: Peak PAGEREF _Toc61872115 \h 5Stage 3: Recession PAGEREF _Toc61872116 \h 6Stage 4: Depression PAGEREF _Toc61872117 \h 7Stage 5: Trough PAGEREF _Toc61872118 \h 7Stage 6: Recovery PAGEREF _Toc61872119 \h 8Methodology PAGEREF _Toc61872120 \h 9Research Design PAGEREF _Toc61872121 \h 9Business Cycle Models Equation PAGEREF _Toc61872122 \h 11Real Business Cycle Model PAGEREF _Toc61872123 \h 11Social Planner Model PAGEREF _Toc61872124 \h 12Exogenous vs Endogenous Theory PAGEREF _Toc61872125 \h 13Recurrence Quantification Analysis PAGEREF _Toc61872126 \h 13Keynesian Theory PAGEREF _Toc61872127 \h 14Credit/debit Cycle Theory PAGEREF _Toc61872128 \h 14Product Based Cycle Theory PAGEREF _Toc61872129 \h 15Political Business Cycle PAGEREF _Toc61872130 \h 15Marxian Economics PAGEREF _Toc61872131 \h 16Results and Role of the Models PAGEREF _Toc61872132 \h 17Results of modeling PAGEREF _Toc61872133 \h 17Conclusion PAGEREF _Toc61872140 \h 22Recommendation PAGEREF _Toc61872141 \h 23References PAGEREF _Toc61872142 \h 24
LIST OF FIGURES
Figure 1: Time series of real GDP PAGEREF _Toc61686177 \h 19
Figure 2: Log Real GNP $ Trend PAGEREF _Toc61686178 \h 20
Figure 3: Deviations from Trend in Log GNP PAGEREF _Toc61872136 \h 20
Figure 4: Deviations from Trend in Log GNP and Consumption PAGEREF _Toc61686179 \h 21
Figure 5: Deviations from Trend in Log and Investment PAGEREF _Toc61686180 \h 22
LIST OF TABLES
Table 1: Summary Statistics PAGEREF _Toc61686181 \h 22
Introduction
The contemporary business environment has gone through tremendous changes. One major reason for the changes in the number of industries present in a given setting at any given time. In the past, it was easier to analyze and understand the business cycle but as time progresses, it has become hard. The business cycle model refers to the fluctuations that the Gross Domestic Product of an economy goes through over a long-term or extended amount of time. Through the model, it is possible to determine the length of the business cycle. The best manner through which one can identify this is by comparing the rate of expansions or booms in a business setting to the rate of recession or contraction in the same setting. One field that is directly impacted by the business cycle model is that of marketing. It is imperative to review the concept of marketing through the business cycle model and consequently comprehend more concerning what the model encompasses.
Background