Can Sticky Consumption Cause Business Cycles

Abstract Sticky aggregate consumption is a demonstrable phenomenon in economies throughout the world, but to our knowledge it has not yet been incorporated into capital structure macroeconomics. Doing so suggests an explanation for business cycles. On the heels of a technological advance, sticky consumption facilitates increased savings and lower real interest rates. These lower rates lead to accelerating elongations in the capital structure. Even though such elongations facilitate more rapid economic growth, if duplicative overinvestment in research and development occurs, economic contraction will follow the exposure of such error.