System Elements in Business Cycles and Stabilizing Effect of Competition Policy
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| Title | System Elements in Business Cycles and Stabilizing Effect of Competition Policy
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| Author | Li Huajun and Chen Ping |
| Organization | Center for New Political Economy, Fudan University |
| Email | lyhuajun@163.com,pchen@ccer.pku.edu.cn |
| Key Words | Principle of Large Numbers, System Elements, Population Model, Birth-death Process, Competition Policy |
| Abstract | The Principle of Large Numbers first studied by Schr?dinger can be extended to the population model of the birth-death process with growth trend, which is capable of explaining endogenous instability in the medium-term and persistent fluctuations in the log-term observed from macro and finance indexes. The magnitude analysis of system elements reveals the possible source of macro fluctuations. Based on empirical analysis of macro and finance indexes of the U.S. economy, the roots of business cycles are not at the micro level of households or firms, but at the middle level of financial market and industrial organization. That is why the investment fluctuations are much larger than that of consumption and GDP. Competition and anti-trust policy at the micro level has significant stabilizing effect at the macro level.
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| Serial Number | WP179 |
| Time | 2012-02-14 |
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