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It is worth mentioning that the term 'business cycle' does not only refer to one variable, for example the GDP which is the main indicator of the economic activity, but also refers to other variables like investment, consumption, expenditures, prices etc.
Moreover an important point is that the variability of the economic fluctuations is not the same for all the variables. For example, the cycle of the investment has significantly greater variability than those of GDP.
Another significant point that we will focus on later, is that if we use the GDP as the general rate of the economic activity then the other economic variables is possible to either commove or lead or lag the GDP cycle.
Particularly, a variable commove with the GDP if the peak of the variable coincide with the peak of the GDP. If the peak of the variable is presented in time before the peak of the GDP then this variable leads the cycle of GDP. Otherwise, this variable lags the cycle of GDP.
Furthermore, some variables move in the opposite direction. It is observed that the increase of the GDP is accompanied from decrease in unemployment. These variables are 'countercyclical'. In the opposite case when the cyclical fluctuations are positively correlated with the cyclical fluctuations of the GDP(like consumption, investment, employment, the money supply and the money demand), we call these variables 'procyclical'. There exist also variables that are neither positively nor negatively correlated with GDP and we call them 'uncorrelated' (like real wages).
Historical evidence and Theories
The reasons of the economic fluctuations became the objective of extensive discussion from the 18th century.
Before 1819 the classical economists rejected the existence of periodicity in the economic crises supporting that they are caused by uncorrelated externals factors (like a war).Jean Charles Leonard de Sismoni and Robert Owen were the first economists who after studying the Panic of 1825,they argued that overproduction and underconsumption were responsible for this economic crisis during the peacetime.
In 1860, Clement Juglar identified the presence of medium-duration economic cycles (Juglar fixed investment cycle 7-11 years).Around a millennium later, other types of cycles were discovered. So there is a discrimination of the cycles according to their periodicity. The Kitchen inventory cycle which lasts from 3 to 5 years discovered by Joseph Kitchin (1923).The Kuznet infrastructural investment cycle (15-25 years) which was investigated by Simon Kuznets(1924).Very important was the contribution of Nikolai Kondratiev, which is known for his research about 'long waves' of duration 45-60 years. The above mentioned economists intended to establish first the statistical existence of the cycles than interpreted them economically.
