Ragnar Frisch's business cycle approach: The genesis of the propagation and impulse model

Business cycle analysis was at the centre of attention in economics during Ragnar Frisch's formative years as a young economist. Frisch was concerned about the inability of modern economies to prevent economic fluctuations from playing havoc with the livelihood of millions. After first studying and improving methods for analysing time series data, Frisch focused on the nature of a proper theoretical explanation of economic fluctuations. Thus, Frisch's interest was not so much business cycle analysis in the substantive sense, but the appropriate methods for analysing and explaining cycles. He is best known for the model he presented in his 'Propagation and Impulse' essay in the Festschrift for Gustav Cassel. Due to Frisch's incomplete publication of his work his essay may have been interpreted with too much emphasis on the content and properties of the macroeconomic model Frisch presented. His real message was to demonstrate his overall paradigm for macro analysis in economics. This article looks in more detail at Frisch's methodology and the genesis of the propagation and impulse model. The presentation is non-technical and includes some biographical details.