Developments in Major Fields of Economics
Edited by Gilbert Faccarello and Heinz D. Kurz
For a long time business cycles and economic growth were considered to be strongly interconnected. During the interwar period, pioneering work in macroeconomics, by leading economists, offered deep theoretical reflections defining the fundamental purposes of the field, and elaborating different analytical frameworks and methodologies. After the Second World War, when macroeconomics began increasingly to exploit mathematical tools, the analysis of growth cycles dynamics appeared a real and a mathematical challenge. The difficulty faced by economists in their various attempts to investigate the growth cycles interactions led to business cycles and growth theories being treated as independent research fields. On the one hand, business cycles theories tried to explain de-trended data movements; on the other hand, growth theory analysed the existence and uniqueness of a stable, long-run equilibrium. This dichotomy was strengthened by the then dominant monetary view, which insisted that monetary policy mattered only in the short run, and had no impact in the long run. However, it would be misleading to assume that all economists believed that business cycles and growth were independent phenomena.
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