Interest Rates and the Structural Characteristic of Business Cycles
|Keywords||interest rates business cycle imbalance of economic structure|
The growth path of economy look like not a smooth curve in the process of economic growth, it showed continued volatility in the state, demonstrated cyclical characteristics. Economists named this phenomenon“business cycles". Business cycle theory has been the macroeconomic research center. Whether the money is neutral is a important question that can’t be ignored in the discussion of business cycle theory. Money plays a crucial role in the business cycles. Classical and neo-classical economics have a conclusion of economic self- balanced and Pareto effective under the assumption of monetory neutral and perfect competition. Neo-classical macroeconomics Under the same assumption, Neo-classical macroeconomics shows that the business cycle is the response of economy for the technology impulse. As well, it is the same dynamic Pareto. Therefore fluctuations in the economy don’t focus on economic growth trend but the economic growth trend itself.Once we have shaken the assumption that it will make the business cycles theory lead to great changes. In the assumption of monetary-neutral that monetary interest rates and natural interest rates has a discrepancy. This difference made fluctuations no longer followed a balanced path and rate imbalance made intertemporal production disorder. The disorder of Intertemporal production shows that the economic structure is imbalanced , such as an imbalanced investment and consumption, as imbalance between the production sector, and so on.The prosperity brought by the artificial credit induce boom leads the structure of economy imbalanced, the excessive prosperity eventually trigger inflation, imbalance in the recession will eventually be adjusted. Malinvestment has been caused by the lower monetary interest rate must be changed in the regression, so economic growth showing boom-and-bust alternated.As a tool of intertemporal resource allocation, the imbalance of interest rates made different assets and departments have different volatility in the cycles. Securities analysts noted this kind of phenomenon; they tried to study the business cycle through the structural characteristics to identify macro-asset allocation logic. This gives us a lot of useful material. Therefore, we hope that according discussing the interest rate theory, the business cycle theory and use the results of securities analysis to discover the structural characteristics of business cycle. Meanwhile we hoped to provide more cooperation appropriate logic to macro-asset allocation or securities analysis of macroeconomic analysis through the business cycle theory.