A Non-mathematical Non-linear Model of the Trade Cycle: Mathematical Reflections on Hugh Hudson's Classic

Hugh Hudson’s classic article on A Model of the Trade Cycle has never, to the best of our knowledge, received the serious attention it deserved (and deserves, even now, 55 years after its original publication). It was written in what we would like to call the classic Hicks-Kaldor mode, i.e., relying on ingenious diagrammatic techniques for expository purposes, and, indeed, developing an innovative model of the trade cycle where interaction of monetary and real forces were modeled in terms of elements common to the classic nonlinear endogenous models of these two pioneers. In this paper we reconsider the analytical contents of Hudson’s classic, and its expository technique, in the light of later, mathematical, approaches to the same topic. Our conclusion is that there is still much to be gained in the expository style adopted by Hudson; but, more importantly, there are innovative suggestion and still relevant suggestions on theorizing and understanding actual performances of advanced industrial economies. Above all Hudson’s classic is permeated with the policy underpinnings of a rich model of the trade cycle.