5 types of business cycles
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| the 5 types of business cycles |
The five types of business circles are presented below as:
1. The short kitchin cycles
2. The long juggler cycles
3. The very long Kondratieff cycles
4. Building cycles
5. Kuznets cycles
Business cycles are a part of the capitalist system. This can be referring to the phenomenon of cyclical booms and depression. In a business cycle, there are wave like fluctuation in aggregate employment, income, output and price level. The word business cycle has taken and defines in different ways by many scholars and economist. Just like professor Haberler who defined business cycle as an alternation of periods of prosperity and depression of both good and bad transactions, Keynes on the other hand definition in his treatise of money is more explicit. A trade cycle is composed of periods of good trade characterized by falling prices and high unemployment rate. Gordon’s in his definition sees business cycles consist of recurring alternation of expansion and contraction in aggregate economic activities, the alternating movement in each direction being self activation and the prevailing virtually, all parts of the whole economy. With all this definition the one that is most accepted is by the scholar esty who said cyclical fluctuation are characterized by alternating waves of expansion and contraction. They do not have a fixed movement, but they are cycles in that the phase of contraction and expansion recur frequently and in fairly similar ways.
The five types of business cycles:
Business cycles are usually classified as under:
1. The short kitchin business cycles
It also known as the minor which is of approximately forty month duration, It is famous after the name of the British economic expert Joseph kitchin, who made a distinction between a major and a minor cycle in 1923. He came to the conclusion on the basis of his research that a major cycle is composed of two or three minor cycles of forty months.
2. The long juggler business cycles
This cycle is also known as the major cycles. It is defined as the fluctuation of business activity between successive crises. In the year 1862 clement juggler, French economist showed that periods of prosperity, crisis and liquidation followed each other always in the same order. Later expert have come to a conclusion that a jugler cycles duration is on the average nine an half years.
3. The very long Kondratieff business cycles
In 1925, N.D Kondratieff, the Russian economist, came to the conclusion that there are longer waves of cycles of more than 50 years duration, made of six jugler cycles. A very long cycle has come to be known as the Kondratieff wave.
4. Building business cycles
Another type of cycle relates to the construction of buildings which is of fairly regular duration. Its duration is twice that of the major cycles and is on an average of 18 years duration. Such cycles are associated with the names of Pearson and warren who are economic experts.
5. Kuznets business cycle
Simon Kuznets who is also an expert, propounded a new type of cycle, the secularswing of 16 to 22 years which is so pronounced that it dwarfs the 7 to 11 years cycle into relative insignificance. This has come to be known as the Kuznets cycle.
Characteristics of business cycles:
The business cycles posses the following characteristics:
1. Cyclical fluctuation are wave like movements
2. Fluctuations are recurrent in nature
3. They are non periodic or irregular. In other words, the peaks and troughs do not occur at regular intervals
4. They occur in such aggregate variable as output, income, employment, and prices.
5. These variables move at about the same time in the same direction but at different rates
6. The durable goods industries experience relatively wide fluctuations in output and employment but relatively small fluctuations in prices. On the other hand, nondurable goods industries experience relatively wide fluctuation in prices but relatively small fluctuations in output and employment
7. Business cycles are not seasonal fluctuation such as upswings in retail trade during Christmas or diwali.
8. They are not secular trends such as long run growth or decline in economic activities
9. Upswings and downswings are cumulative in their effects.
Thus business cycles are recurrent fluctuations in aggregate employment, income, and output and price level.
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