The physics of business cycles and inflation
General Finance
2012-12-07 v1 Physics and Society
Abstract
We analyse four consecutive cycles observed in the USA for employment and inflation. They are driven by three oil price shocks and an intended interest rate shock. Non-linear coupling between the rate equations for consumer products as prey and consumers as predators provides the required instability, but its natural damping is too high for spontaneous cycles. Extending the Lotka-Volterra equations with a small term for collective anticipation yields a second analytic solution without damping. It predicts the base period, phase shifts, and the sensitivity to shocks for all six cyclic variables correctly.
Keywords
Cite
@article{arxiv.1212.1282,
title = {The physics of business cycles and inflation},
author = {Hans G. Danielmeyer and Thomas Martinetz},
journal= {arXiv preprint arXiv:1212.1282},
year = {2012}
}