Business Cycle and Conserved Quantity in Economics

TL;DR

This paper introduces a dynamical model for business cycles based on an optimal DI framework, revealing a conserved quantity akin to energy, which explains the observed 6-7 year periodicity in economic activity.

Contribution

It presents a novel conservative dynamical model for business cycles that reproduces realistic periodic behavior, linking economic dynamics to energy-like conserved quantities.

Findings

The model predicts a 6-7 year business cycle period.

Existence of a conserved quantity analogous to energy in the model.

Periodic motion is observed in the conservative system.

Abstract

We propose a dynamical model for business cycle based on an optimal DI model. In the model there exists a conserved quantity, which corresponds to the total energy in a dynamical system. We found that the business cycle with the period 6 or 7 years is nicely reproduced, since the model predicts a periodic motion in the conservative system.