01921cas a2200241 a 4500 AALejournalIMF021547 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513571676 1018-5941 BD-DhAAL BD-DhAAL Gross, Marco. Beautiful Cycles : A Theory and a Model Implying a Curious Role for Interest / Marco Gross. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (37 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Where do economic cycles come from? This paper contemplates an utmost minimalistic model and underlying theory that rest on two assumptions for letting them emerge endogenously: (1) the presence of interest-bearing debt; and (2) a degree of downward nominal wage rigidity. Despite its parsimony, the model generates well-behaved, self-evolving limit cycles and replicates six essential empirical facts: (1) booms are long- while recessions short-lived; (2) leverage is procyclical; (3) firm profit and wage shares in GDP are counter- and procyclical, respectively; (4) Phillips curves are downward-sloping and convex, and Okun's law relation is replicated; (5) default cascades arise endogenously at the turning points to recessions; (6) lending spreads are countercyclical. One can refer to the model as being of a Dynamic Stochastic General Disequilibrium (DSGD) kind. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2021/067 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/067/001.2021.issue-067-en.xml IMF e-Library