Impulse or propagation? How the tides turned in Business Cycle Theory

This paper contains a short history of business cycle theory. It is argued that in the
course of time the emphasis shifted from a mainly exogenous to a mainly
endogenous explanation of the cycle. After the integration of the two approaches in
the so-called impulse and propagation theory, the balance kept shifting between an
emphasis on endogenous propagation mechanism (Keynesians), the exogenous
impulse mechanism (New Classicals) and back again to the propagation mechanism
(New Keynesians). The shifts in emphasis in theory are accompanied by changes in
the perceived window of opportunity for economic policy.