Economic Cycle Research

　　Economic cycles are also known as business cycles, business fluctuations, or boom-bust cycles. They refer to a phenomenon in economic operation where economic expansion and contraction alternate periodically, repeating in a cycle. This involves fluctuations in gross national output, gross income, and total employment.
　　Economic cycles are usually divided into four phases: prosperity, recession, depression, and recovery. In the prosperity phase, national income is above full employment levels, production increases rapidly, investment grows, credit expands, price levels rise, employment increases, and the public is optimistic about the future. The recession phase is a transition period from prosperity to depression, during which the economy begins to decline from its peak but has not yet reached its trough. Afterwards, the economy enters a depression, where national income is below full employment levels, production sharply decreases, investment falls, credit tightens, price levels decline, unemployment is severe, and the public is pessimistic about the future. The lowest point of a depression is called the trough, where employment and output fall to their lowest. Next is the recovery phase, a transition period from depression to prosperity, where the economy begins to rebound from the trough but has not yet reached its peak.
　　There is no unified consensus on the length of economic cycles. Among the many economic cycle theories, the Kondratiev cycle, Kuznets cycle, and Kitchin cycle are the most famous. The Kondratiev cycle is a long-wave theory proposed by Russian economist Nikolai Kondratiev in 1926. He believed that the length of this economic cycle is 50 to 60 years, caused by internal reasons of the capitalist economy, and attributed economic long waves to the disruption and restoration of economic equilibrium caused by the renewal and replacement of major fixed capital products. The Kuznets cycle is also a long economic cycle. It is a theory that reveals the economic cycles of major capitalist countries from the long-term movements of production and prices. It was proposed by American economist Simon Kuznets in his 1930 book "Secular Movements in Production and Prices." This is an economic cycle lasting 15-25 years, with an average length of about 20 years. Because this cycle is mainly marked by the periodic fluctuations in the prosperity and decline of the construction industry, it is also called the "building cycle." The Kitchin cycle is also known as the "short wave theory." In 1923, British economist Joseph Kitchin started from the phenomenon that when manufacturers overproduce, inventory builds up, leading to reduced production. In his "Cycles and Trends in Economic Factors," he called this short-term adjustment of 2 to 4 years the "inventory" cycle, which is also known as the "Kitchin cycle." He believed that economic cycles come in two sizes: large and small. Capitalist economic cycles are only 3-5 years long, with a large cycle encompassing about 2 or 3 small cycles, and a small cycle having an average length of about 40 months.
　　The currently identified causes, or more precisely, catalysts, of economic cycles primarily include money supply, inventory, asset collateral, market participant psychology, exhaustion phenomena, and credit collapse. When the money supply exceeds its trend level, monetary expansion occurs, leading to optimism, increased economic activity, asset appreciation, and later, an acceleration in the velocity of money. As economic activity begins to increase, companies' inventory levels decrease, inducing them to increase orders, which will lead to further overall growth and increased sales. When a company's expansion encounters a bottleneck, it will be forced to expand capacity, which will create more growth. During the prosperity phase of the economy, asset prices begin to rise, leading to an increase in collateral value and a surge in lending. When asset prices grow to a certain stage, they capture the minds of many immature investors, leading to large investment bubbles, a situation often referred to as the "emotional accelerator" of the economic cycle. Economic resources are limited in the short term, so after developing to a certain stage, economic growth will encounter bottlenecks in labor, physical resources, and credit; this is the so-called exhaustion phenomenon. At this point, growth slows, and a turning point appears. Credit collapse usually only occurs during severe recessions and can lead to a liquidity trap, delaying the pace of economic recovery. Of course, the above is merely a rough model describing economic cycles, only involving internal economic issues. In reality, economic cycles are very complex, and more often involve external factors such as extreme weather or irrational market panic.