ABSTRACT
This chapter reviews aspects of earlier leading business cycle theories and recent new developments, notably in the United States. It offers brief comments only in respect to the discussions regarding the rational expectations school and the relation between the price-cost cycle and the business cycle. A major theme of rational expectations within the new classical equilibrium theory is that anticipated policy changes will have no real effects, only monetary effects. Australia's experience, in some important respects, has been comparable to that of the United States for both growth cycles and classical cycles. Meanwhile, those of the rational expectations school appear to have exaggerated the extent to which it seems reasonable to view a "family likeness" between business cycles. While explanations of the duration of the business cycle have been lacking, there has been general recognition of the fact that fluctuations in inventory investment may play an important part in generating short cycles.
