Economic and Financial Transactions Govern Business Cycles

Victor Olkhov

MPRA Paper from University Library of Munich, Germany

Abstract: Problem/Relevance - This paper presents new description of the business cycles that for decades remain as relevant and important economic problem. Research Objective/Questions - We propose that econometrics can provide sufficient data for assessments of risk ratings for almost all economic agents. We use risk ratings as coordinates of agents and show that the business cycles are consequences of collective change of risk coordinates of agents and their financial variables. Methodology - We aggregate similar financial variables of agents and define macro variables as functions on economic space. Economic and financial transactions between agents are the only tools that change their extensive variables. We aggregate similar transactions between agents with risk coordinates x and y and define macro transactions as functions of x and y. We derive economic equations that describe evolution of macro transactions and hence describe evolution of macro variables. Major Findings - As example we study simple model that describes interactions between Credits transactions from Creditors at x to Borrowers at y and Loan-Repayment transactions that describe refunds from Borrowers at y to Creditors at x. We show that collective motions of Creditors and Borrowers from safer to risky area and back on economic space induce frequencies of macroeconomic Credit cycles. Implications – Our model can improve forecasting of the business cycles and help increase economic sustainability and financial policy-making. That requires development of risk ratings methodologies and corporate accounting procedures that should correspond each other to enable risk assessments of economic agents

Keywords: Business cycle; Economic Transactions; Risk Assessment; Economic Space (search for similar items in EconPapers)
JEL-codes: C02 E00 E32 F44 G00 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in ACRN Oxford Journal of Finance and Risk Perspectives 1/2.7(2019): pp. 102-122

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/93269/8/MPRA_paper_93269.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/95056/8/MPRA_paper_93269.pdf revised version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:93269

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().