Abstract

Business cycles bear similarities to self-sustained oscillations in nonlinear dynamics. The periodic occurrence of boom, recession, depression and recovery phases in economic systems is an empirical fact. But the reasons for business cycles are still debated. Are they induced by exogenous shocks, or do they result from the endogenous nonlinear coupling of economic dynamics? We support the endogenous explanation by providing a model that generates business cycles when considering a depleting resource. This depletion is reflected in a production function for economic output dependent on the input of capital and energy. Using this production function, we derive a nonlinear dynamics that allows for the coexistence of limit cycles and stationary solutions of high productivity.