TY - JOUR

T1 - Disentangling the enigma of multi-structured economic cycles - A new appearance of the golden ratio

AU - de Groot, Bert

AU - Segers, Rene

AU - Prins, D

N1 - Publisher Copyright:
© 2021 The Authors

PY - 2021/8

Y1 - 2021/8

N2 - We study whether there is an interrelationship between the lengths of economic cycles. Such an interrelationship would be helpful to signal future economic downturns, thus to alleviate economic and societal distress. To detect the lengths of economic cycles, we introduce an improved method, where Fourier analysis is coupled with GARCH regression, mixed distribution estimation, and harmonic regression. We apply our methodology to detect cycles in percentage GDP growth in 25 OECD countries, and in Europe. The results indicate that in each economy, between two and five cycles are present. Cycles with a length between 5–6 years and between 9–10 years appear most frequently. A meta-analysis on the detected cycle lengths reveals that the ratio between the lengths of consecutive cycles often closely matches the golden ratio, ϕ. Interestingly, this finding opposes several existing theories about multi-cycle structures, which imply that the lengths of shorter cycles should be integer fractions of the lengths of longer cycles. Our paper thus provides a new direction for theory development regarding economic cycles and dynamic stability.

AB - We study whether there is an interrelationship between the lengths of economic cycles. Such an interrelationship would be helpful to signal future economic downturns, thus to alleviate economic and societal distress. To detect the lengths of economic cycles, we introduce an improved method, where Fourier analysis is coupled with GARCH regression, mixed distribution estimation, and harmonic regression. We apply our methodology to detect cycles in percentage GDP growth in 25 OECD countries, and in Europe. The results indicate that in each economy, between two and five cycles are present. Cycles with a length between 5–6 years and between 9–10 years appear most frequently. A meta-analysis on the detected cycle lengths reveals that the ratio between the lengths of consecutive cycles often closely matches the golden ratio, ϕ. Interestingly, this finding opposes several existing theories about multi-cycle structures, which imply that the lengths of shorter cycles should be integer fractions of the lengths of longer cycles. Our paper thus provides a new direction for theory development regarding economic cycles and dynamic stability.

UR - http://www.scopus.com/inward/record.url?scp=85104694172&partnerID=8YFLogxK

U2 - 10.1016/j.techfore.2021.120793

DO - 10.1016/j.techfore.2021.120793

M3 - Article

SN - 0040-1625

VL - 169

JO - Technological Forecasting and Social Change

JF - Technological Forecasting and Social Change

M1 - 120793

ER -