Is “Malinvestment” Enough to Go Bust?

The business cycle refers to fairly broad changes in economic activity according to a well-identified sequence, which includes a boom, a crisis, a period of stagnation, and then a new expansion.1 This sequence tends to repeat itself; but neither the length of the cycle, nor the intervals between cycles necessarily follows a regular time pattern. There is substantial agreement both about this definition and about the temporal irregularities. The only open question is on whether the cycle should be described in terms of proportional changes in GDP, or rather in terms of GDP deviations from a long-run trend. Following the early literature on the subject, this paper accepts the first definition. 

Volume 19, Number 3 (2005)