Business Cycles in the Time and Frequency DomainsTraditional textbooks present the ideas of business cycles based on the analysis of economic data in the time domain. This approach, although useful, departs from the basic notion, conceived almost two centuries ago, that most Macroeconomic
variables show periodic fluctuations analogous to those described by trigonometric functions.
This worksheet takes some of the most representative models of the modern theories of the business cycles in their original format (time domain), and analyzes their dynamic properties using the Fourier and z-transforms (frequency domain).
Since the content of this paper is aimed at students who may not be familiar with some of the required Mathematics, we decided to follow a heuristic approach to develop their intuition with the help of examples. We choose Maple® as our tool for implementing such examples.
The paper covers topics such as fluctuations caused by incomplete information, wage and price rigidities, technology shocks, bankruptcy costs and structural changes.
Along this document, the reader will find some (answered)
questions and various Maplets®. Their purpose is
to give him/her additional tools for his/her understanding of policy issues and for the analysis of empirical data.