Business Cycle Based on Optimal DI Model

We propose a dynamic model for the economic growth (ΔG) and the diffusion index (DI) in order to explain the business cycle. This model is described by equations analogous to the optimal velocity model in traffic flow. In the model there exists a conserved quantity, which corresponds to the total energy in a dynamical system. We found that the business cycle with the period 5–8 years is favorably reproduced, since the model predicts a periodic motion in the conservative system.