Earth Economics

Earth Economics

An Introduction to Demand Management, Long-Run Growth and Global Economic Governance

Peter A.G. van Bergeijk

Taking stock of emerging planet data and analysing policies during the global crisis, Earth Economics provides a comprehensive and accessible introduction to basic macroeconomic concepts, methods and principles, and their application to real world data.

Chapter 3: Earth's Business Cycle

Peter A.G. van Bergeijk

Subjects: economics and finance, environmental economics, environment, environmental economics


Booms and busts are the tide of the Earth Economy. These fluctuations take place along the longer-term developments that we will discuss in Part II. The macroeconomic fluctuations typically turn up in changes of the reported rates of change of the economic variables. The rate of growth may, for example, slow down (and even turn negative), but then after some time usually a recovery sets in. These fluctuations constitute the business cycle that is the topic of this chapter. In order to get a better understanding we will first take a look at three key indicators of the business cycle for which we have data over a longer period: economic growth, inflation and unemployment. In this chapter we will study the eartheconomic developments over the period 1980 – 2011. The choice for that period is pragmatic: the IMF World Economic Outlook (WEO) database readily provides the data for this period (and 2012 at the time of writing is still an estimate). With regard to another important indicator, the rate of unemployment, we will by necessity have to limit ourselves to a somewhat shorter period as estimates of the global rate of unemployment have only been provided by the International Labour Organization for a period starting in 1991, but as you will see we can also for this shorter period illustrate how short-term fluctuations in GPP relate to the planet’s unemployment rate. This Part focuses on these fluctuations and thus on the short run. We will use a longer time frame in Part II where we will analyse and discuss longterm growth and long wave theories.

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