The Behavior of the Countries' Economies presents certain oscillations, these change over time and depend on different factors.
The axis variable taken to measure these movements is the Gross Domestic Product. If we were to graph it, we would observe a wave of sinusoidal movement varying over a linear vector.
By indicating a moving wave permanently reconfiguring itself on a horizontal line, we deduce four (4) positions in relation to the baseline, one point in minimum posture, another point in maximum posture and curves that link both points up and down.
Development
Position 1) Minimum position: this phase or cycle will be called the Depression Cycle or Economic Unemployment, it is the most critical cycle of an economy, here industrial production falls as a consequence of the decrease in Aggregate Demand, initially this productive stoppage begins as an over-stock of products, with a high cost of holding inventories for companies, this in turn generates unemployment, very possible is the drop in prices, the drop in quality, investments are paralyzed, consumption expectations fall, the State collects less given the loss of business activity, summarizing we can say that it is the cycle of chaos.
Since not everything can be kept in the same state, over time and depending on the Economic Agents, including State Policies, the second state gradually arrives. 2) Economic Recovery: in this cycle of reversal of industrial unemployment, the variables begin to show slight improvements, it is a process that goes from minor to major, speaking of the Recovery of Demand, reduction of the cost of holding excess stock in the Private sector, price balancing, raising the quality of products and services, Investments appear again, the consumer briefly recovers his purchase expectation, there is greater tax collection, all the variables mentioned in point one are gradually reversed.
After this path of ascent after a certain time the Nations reach a new state 3) we will call it the Cycle of Apogee or Economic Success: in this period all the variables take on a shine of excellence, Supply and Demand balance, Investments arrive at a maximum peak therefore the idle capacity disappears, productive employment grows, the phenomenon of innovation and reach to new technologies occurs, the quality of products and processes increases, the treasury collects more, there being the possibility of better distribution of wealth for strengthen this cycle of bonanza longed for by all nations.
Sadly, there is a regressive path towards the cycle of economic unemployment, we call it 4) Cycle of Decay or Economic Contraction: here everything achieved in terms of economic harmony begins to erode, identically that in the recovery cycle, the variables impoverish from less to greater, on certain occasions the crash is more sudden, and so we return to the first depressive cycle.
Business cycles can also be differentiated by their duration over time.
Economic Cycles
In any of these stages there are Pro-cyclical variables that are those whose behavior will always be the same as the direction of the cycle, other variables are Counter-cyclical whose behavior is inverse to that of the cycle that is being lived, finally there are A-cyclical variables with predictions difficult to infer.
- A Pro-cyclical variable is GDP, we know that it will increase or decrease according to the cycle.
- A counter-cyclical variable is the Unemployment Rate, if the cycle goes up this variable will decrease and vice versa.
- An A-cyclical variable can be Inflation, depending on the nascent cause it can increase or decrease depending on the phenomenon that causes it.
Conclusion: studying the countries under analysis, the cycles have a more or less regular trend, there is a factor generally left aside in this analysis, it is the Human Factor, being the people who move the Economy of a Region a lot should be paid attention to their behavior, vision of today and their future, something mentioned in other writings….. "If people intervene the Indicators are Soft", as the economy is an elementally social science, observing the behavior of citizens and their organizations, We can deduce what cycle we are in and what will be the next one.
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Lic. Ángel M. Papadópolos
Diploma in Local Development Oriented to Employment Generation
