Full text: Trend and Cycle

short recession then this will strengthen the growth tendencies 
via the integral term mentioned above. 
What is to be avoided is an image of the cycle in which there is 
fluctuation round a pre-determined trend; I am myself guilty of 
having used the, simile of a ”badly functioning controller” which 
after a time always returns to a given long term path. There is a 
negative feedback (characteristic of the controller) but the long 
term path to which it pushes the system is itself influenced and 
shaped by the course of the trade cycle! 
Now on the face of it it would seem th"at a linear equation, since 
its independent solutions are combined by superposition to give 
the resulting time series, could not represent the interdependence 
of trend and cycle. In actual fact,however, the solution depends 
on initial conditions,and, the process being frequently 
interrupted by exogenous disturbances,the initial conditions 
change (changing phase,amplitude and trend ). An ex post 
statistical analysis of^ the time series will not easily reveal the 
trend and the cycle wj^lch constitute the theoretical solution of 
the equation, even yi we do not allow for possible changes in the 
parameters in the^course of time. 
We turn now to the question what the "long term memory” can mean 
in the concrete. There are in principle two possibi1ities:It can 
involve a positive feedback,and then it will tend to perpetuate an 
existing trend; or it can involve a negative feedback,and then it 
will lead to a long wave and not a trend. 

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