Handbook on the History of Economic Analysis Volume III
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Handbook on the History of Economic Analysis Volume III

Developments in Major Fields of Economics

Edited by Gilbert Faccarello and Heinz D. Kurz

Volume III contains entries on the development of major fields in economics from the inception of systematic analysis until modern times. The reader is provided with succinct summary accounts of the main problems, the methods used to address them and the results obtained across time. The emphasis is on both the continuity and the major changes that have occurred in the economic analysis of problematic issues such as economic growth, income distribution, employment, inflation, business cycles and financial instability. Each Handbook can be read individually and acts as a self-contained volume in its own right. It can be purchased separately or as part of a three-volume set.
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Chapter 4: Business cycles and growth

Michaël Assous, Muriel Dal Pont Legrand and Harald Hagemann


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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