THE ROLE OF MONETARY POLICY IN THE CONCEPTS OF BUSINESS CYCLES
Abstract
The article is devoted to the question of the role of monetary policy in the concepts of business cycles. The economic stabilization of the 1980s, which was a consequence of the Fed’s effective activism, gave rise to the notion of the fluctuation control within business cycles. However, the 2008-2009 crisis and further successive exogenous shocks have shown the precocious nature of such findings and revived interest in the concepts of business cycles and the role of monetary policy within them. Despite the extensive work of scientific works on the subject, according to the authors, special interest is the extrapolation of the conclusions of various concepts of business cycles on the course of the economic crisis of 2008-2009 and exogenous shock associated with the COVID-19 pandemic. Therefore, the authors aim to analyze the concepts of business cycles, determine the role of monetary policy in them and compare the conclusions of the concepts studied with the course of the crisis of 2008-2009 and exogenous shock associated with the COVID-19 pandemic. As a result of the study, the authors noted that in the scientific literature, the explanation of the nature of business cycles is based on factors of monetary policy or indicators that characterize the production sphere of the economy (real business cycles). Within the real business cycles, the need for neutral monetary policy is substantiated, since attempts to fine-tune the economy through the channels of monetary policy are faced with inevitable delays in its influence. Monetary understanding of the nature of business cycles gives monetary policy a central importance based on the recognition of non-monetary value of money and is based on the historical experience of the economic stabilization of the 1980s as a result of the effective monetary policy of central banks. The revival of interest in interpretations of business cycles is associated with the economic crisis of 2008-2009 and the COVID-19 pandemic. Each of them has its own nature, and their trends are explained in different concepts of business cycles. Kidland-Prescott's concept, based on technological shocks and maximization of labor as driving forces of business cycles, explains the causes of the recession that occurred during the COVID-19 pandemic. In turn, unreasonable expansionary monetary policy, as a prerequisite for the economic crisis of 2008-2009, fully corresponds to the explanation of the inevitability of recession (depression) from the position of the Austrian school.
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