Economie cycles and the shot model

It is shown how economic cycles can be generated by discrete events occurring at random. The economic impact of such events is described by the filtered output of a shot model. The necessary filtering is shown to arise naturally in economic systems because of the way economic statistics are compiled and because many economic processes have long time constants. Since a variety of economic decisions take the form of discrete events, it is argued that the model discussed represents a plausible addition to the stock of business cycle models. This leads to the question of how the model is affected by cyclical fluctuations in the rate at which random effects occur engendered by other sources of economic cycles. It is shown that there is a considerable tendency for the cycles generated by the two sources to interlock. Finally a number of applications of the model are discussed.