Macroeconomic stability is more an accident than a pattern. Practice shows that there is no equilibrium in the economy. Following a period of prosperity and development, a period of decline necessarily ensues, accompanied by unemployment. Moreover, economic cycles and their types differ in time intervals and other features. So, in duration they are short, medium and long.
Short cycles were defined by Joseph Kitchin, an English economist. He linked them to fluctuations in gold reserves. The frequency established by Kitchin is forty months.
Wesley Mitchell, the founder of econometrics, believed that the reason for short cycles lies in cash flow, and agreed with the previous frequency.
In fact, these cycles are associated with a lack of balance in the consumption market. Changes in the credit sector are their cause, and therefore they appear in the form of credit crises.
In the second half of the 19th century, Clement Jougliard, a French economist, explored the middle cycles. He saw their reason also in the field of credit. Clement Jougliard determined the frequency of average cycles of eight to ten years.
The construction cycles allocated by Simon Kuznets belong to the same kind of cycles . He connected them with periodic (every fifteen to twenty years) housing renovation.
Long (or long) cycles exist due to changes in infrastructure, energy sources and basic technologies. Otherwise, these cycles are also called Kondratiev cycles, by the name of the scientist from Russia - Nikolai Kondratyev. He studied the dynamics of coal, steel, tin production, as well as the average level of wages, prices, foreign trade and other indicators in the United States and some Western European countries for 140 years (starting from the last two decades of the 18th century and ending with the twenties of the 20th century). Kondratiev conducted econometric studies and determined that long cycles last 54-55 years, while having an ascending and descending phase.
The downward phase, when the basic technologies and technological structures change, lasts from 20 to 25 years.
The upward phase, when the economy, technology and science is flourishing in society, lasts from 25 to 30 years.
There is no equilibrium in the economy for many reasons. Firstly, macroeconomic instability is largely dependent on such factors as the technical equipment of production. Frequent changes provoke short periods of decline and rise, and those that are less frequent (for example, the construction of new bridges and other structures) make these periods longer.
But macroeconomic instability is caused not only by this factor. None of the economists of the 19-20 centuries was indifferent to the problem of the periodicity of such fluctuations in the economy. 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 action of the accelerator and multiplier effect.
2. Supporters of the theory of the political business cycle believe that macroeconomic instability arises as a result of the actions of politicians in the field of money, budget, loans and taxes.
3. Advocates of the theory of an equilibrium economic cycle see the reasons for the fluctuation of the trend precisely in the short-term time period.
4. Scientists who advance the theory of the real business cycle suggest that macroeconomic instability arises from abrupt changes in different sectors of the economy, that is, when production technologies change dramatically.
Each of these points of view, to one degree or another, correctly indicates the causes of fluctuations. But a general theory that all economic schools could recognize does not exist today .