The combined cycle theory: an alternative analysis

Abstract

The objective of this work is to present a possible “combined cycle theory” resulting from the merger of two different theories; in one side from the endogenous monetary cycle theory and on the other from Schumpeter’s productive cycles, along with the calculations of Xavier Gabaix. The paper is organized as follows; First, we give an overview of the history of the economic cycle theories, where we can find the main scientific contributions in this field; Second, we explain the theory of endogenous monetary cycle and we will try to demonstrate it using data its correlation with reality, as exemplified by the current economic crisis in Spain; Third, we define the production cycle theory of Schumpeter and try to find empirical evidence by Xavier Gabaix calculations; And fourth, we discuss a critique of other cycle theories, emphasizing its erroneous assumptions and finally we present the conclusions. At the end you can find Appendix 1 where we present a critique of methods of national accounts for not taking into account essential aspects of the economy