Chapter

The Theoretical Model: The Economy's Behaviour in Major Fluctuations

Christopher Dow

in Major Recessions

Published in print October 2000 | ISBN: 9780199241231
Published online November 2003 | e-ISBN: 9780191596179 | DOI: http://dx.doi.org/10.1093/0199241236.003.0010
 The Theoretical Model: The Economy's Behaviour in Major Fluctuations

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The discussion presented in previous chapters results in a view of the economy that appears novel in a number of ways, and by way of summarizing the discussion, this chapter aims to put the elements together, and to draw out some implications of the theoretical model that results. The next chapter summarizes the empirical results of the study, and this chapter and that one are designed to be self‐contained, and briefly repeat key facts and arguments from earlier chapters; they are intended to be read together, and to provide a background for the later discussion of policy in Ch. 12. Some elements of the model presented are more firmly grounded than others, but the different elements do not all stand or fall together as a bloc. Compared with many existing models of the economy, the model presented lacks some elements of self‐adjustment, and this aspect is described in Sect. 10.1; Sect. 10.2 describes how it is supposed that major recessions originate, and how the view here taken differs from that of other models; Sect. 10.3 notes how the shape taken by major recessions as here conceived differs from what is usually assumed, and goes on to set out the implications for the role of changes in expectations or confidence in determining major recessions. Appendix A10 sets out inter‐sectoral relationships more formally and, in particular, illustrates the financial implications of fluctuations and the key role of the banking system.

Keywords: banking system; fluctuations; inter‐sectoral relationships; models; recession; theory

Chapter.  7717 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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