Study On Endogenous Fluctuations In Economic System

Business cycles or fluctuations goes always with economic growth in the long history, just like its shadow. Serious fluctuations may harm the growth. The major task of the research on busyness cycles is to provide policy decision support based on a proper understanding of the movement of the system. The changing characteristics of business cycles always challenges the current economic theories.Economy is a complex self-organized system. The driving power of growth and fluctuations comes automatically from within the system. The paper is designed to analyze the endogenous fluctuation of the economy from the viewpoint of system-engineering methodology.Researches on fluctuations or business cycles has a long history and many achievement have been made. But the controversy among different theories never ceases. This means more efforts should be paid on the research in the concerned field. The first two chapters introduced the research background, analyzed the complex characteristics of the economic system and some basic conceptions. The paper proposes a three-dimension structure for indicating that value, information and time are basic factors for the research of complex economic problems.Exchange is the basic economic activity within which the flows of values are not synchronous. A flow chat of the macroeconomic system is drown for the analyzing the value flow. The relations among some order parameters in the asynchronous movement is analyzed. An inflation equation is proposed based on the analysis and the parameters in the model are detected. The asynchronous of value flow may directly cause disequilibrium between demand and supply and lead to fluctuations on aggregates or price. Further more, the unique velocity of the economy is detected and the concept of effective quantity of money is proposed, which can also be understood as the endogenous quantity of money of the economy.Economic fluctuation has close relation with the status of value distribution structure of the economy. Lower price principle is proposed which means the aggregate price of the system is basically determined by the lower-income classes and this will lead to a lower price level. The polarized distribution of income or wealth will make the system unstable and may be easier to suffer fluctuations. Conceptions of weak-redistribution and strong redistribution process are introduced for supportingthe analysis. Economic bubbles and liquidity trap are also analyzed from this viewpoint value distribution also. Business cycles can be caused by many factors. Whether the system fluctuate seriously or not depending on the stability of itself.Information is the basic factor for determining the decision and behavior of agents in the system. Nash equilibrium claims a composition of decision set exists under certain information conditions. Based on this idea, one can conclude that lots of similar agents may make similar decisions under similar information environment. The result might be a severe fluctuation in the system. This kind of fluctuations can be called information symmetric effect. Cobweb model is a typical theorem reflecting the information symmetric effect. Since the government plays more important role in contemporary economy, business cycles show a "policy cobweb" in the long run. By introducing a coordinate transformation, it is shown the formation of Phillips loops is the result of the movement of cobwebs.The endogenous driving power for economic growth and fluctuations is technological progress (TP). It is not proper for measuring TP with Solow residual and other methods. By introducing the "inertia low of value", the paper proposed to use TPCD(technological progress caused depreciation) for measuring TP. Then, based on basic accelerator model, a cyclical growth model with stochastic TP and flexible accelerator is deducted. The value and behavior of the parameters in the model are found to be consistent with the facts and popular economic theories.The last part of the paper analyzed some important topics concerning business cycles in Chinese economy. For business cycles after the opening and reform, unstable policies should be mainly attributed to. The Phillips loops in China are consistent with the policy-cobweb hypothesis. Practical data also show that inflation, endogenous quantity of money and economic growth have very close relation. For the high growth trend with low inflation in the recent many years, technological progress makes the major contribution. Government finetune might be necessary for healthy economic growth, but pertinency and stability are two important principles for finetune policy choice.