BUSINESS CYCLES AND INTERNATIONAL CONTEXT IN PERU

Abstract

The economic cycles or cyclical fluctuations of the economic activity, can be defined as the oscillations of the effective product about the potential product. According to the Keynesian ones, the cycle is the result of the exogenous disturbances, extended and prolonged by internal mechanisms. The monetarists defended the monetary causality of the cycles. A nominal disturbance in an economy with rigid prices and wages, was capable of generating not alone nominal changes, but also royal(real) changes, generating a cycle. The new classic ones centre their attention on the models of real cycle (RBC), where the impulses come from technological shocks. The cycles are due also to changes in international conditions, it means, fluctuations in economic activity in Peru is due to changes in international economic variables such as interest rate, terms of trade and production world. The hypothesis of the present study is that the economic cycles, in an open and small economy as the Peruvian, are basically explained by the changes in the international conditions. In this study it is demonstrated that the economic cycles in Peru are explained fundamentally by the shocks of the rate of international interest and the economic world activity.