Logistic Analysis of Business Cycles, Economic Bubbles and Crises

Abstract

The chapter deals with business cycles, economic crises and other paradoxical economic phenomena and analyses their causes by applying logistic growth models. The logistic growth model allows investigating paradoxical and untypical aspects of real capital accumulation in the situation of exhausted investment potentiality or diminishing law of returns. Logistic capital accumulation theory is based on the main principles developed in classical finance theory. In classical finance theory exponential growth or rule of compound interest serves as the main law. In logistic growth theory the density dependent growth function is being applied instead of exponential growth function. The application of logistic theory in analysis of economic phenomena such as business cycles, economic bubbles, laws of diminishing returns etc. allows generating new insights. The term -business cycle or economic cycle applied in the chapter describes economy-wide fluctuations in economic activity around a long-term growth trend. It typically involves shifts over time between periods of relatively rapid growth of economic output (boom), and periods of relative stagnation or decline (contraction). Such fluctuations are often measured using the growth rate of real gross domestic product. The logistic discounting of cash flows allowed to develop mathematical model and apply it for depicting economic phenomena named as economic bubbles or economic overheating.