Kurdish Studies

ISSN: 2051-4883 | e-ISSN: 2051-4891
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Understanding the Impact of Business Cycle Shocks on the US Economy: A Monetary Approach

Ahmed Abdulla Salman , Hassanain Mohsin Mukheef
College of Administration and Economics, Wasit University
Keywords: Business cycle shocks, Monetary approach, U.S. economy, financial derivatives.

Abstract

The topic of business cycle shocks has emerged in the literature of capitalist economic philosophy, with some attributing it to climate change and others linking it to a lack of consumption, a decrease in profit margins, or swings in monetary variables. Hence, the study aimed to examine the influence of fluctuations in monetary indicators on objective indicators, which in turn cause business cycle shocks in Turkey. The research hypothesis posited that the US economy is influenced by and influences natural business cycle shocks, manifested in the indicators of the US economy throughout the study period. To test this hypothesis, we examined the trajectory of monetary indicators such as money supply, interest rate, and private bank credit and their influence on the validity of objective indicators such as GDP, investment, and unemployment rate. The study revealed that variations in monetary indicators result in absolute indices, giving rise to two distinct business cycles within the US economy. The first factor is the outcome of an internal disruption caused by the US derivatives crisis in 2008, which hurt the entire global economy. The second factor pertains to the external shock caused by the widespread outbreak of the Corona epidemic in 2020. It is worth noting that the effects of these monetary shocks on actual variables such as output, investment, and employment are not uniform. The impact varies depending on the magnitude and severity of the shock, as well as the degree of autonomy of the monetary authority

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