During the late 19th and early 20th century the whole world witnessed fluctuations in economic life. For years there was a period of prosperity followed by many years of poverty. This situation provoked economists to study the fluctuations in economic life. The result at which they arrived was that the Laissez faire capitalism has a natural tendency to progress through fluctuations i.e. through periods of contractions and expansions or depression and boom. This fluctuation in an economic life came to be known as the trade cycle.

Different economists have given different opinions on the actual definition of the trade cycle.

Prof. Estey Defines the Trade Cycle as Follows
“Business cycles are fluctuations in general business activity that appear through the inter-related fluctuations of many specific cycles.”

According to Prof. Estey, specific cycles appear in different sectors of the economy e.g. National Income, Imports and Exports, Employment, Retail and Wholesale trade etc. These different sectors are inter-related with each other; hence, specific cycles of an economy get integrated with each other. This generates a general fluctuation in the business life of the people i.e. the trade cycle.

Prof.Haberler is another Economists Who Sought to Define the Trade Cycle
“The business cycle in the general sense may be defined as an alteration of periods of prosperity and depression, of goods and bad trade.”

From this definition we are also to gather the fact that there are two main phases of a trade cycle i.e. prosperity and depression or good and bad trade. When these two phases follow each other regularly this would be a trade-cycle.

Prof. Gordon Defines Trade Cycle as Follows
“Business cycles consist of recurring alternations of expansion and contraction in the aggregate economic activity, the alternating movements in each direction being self-reinforcing and prevailing virtually all parts of the economy.”

According to this definition, an aggregate economic activity could either be for a particular country or even the whole world. Basically what it means is that it is not confined to a particular sector of the economy. Periods of prosperity and depression follow each other regularly and these movements are such that they are self reinforcing i.e. they have a natural tendency to move. Another point from this definition is that all movement from the various sectors of the economy take place in one direction at a time i.e. if National Income goes up, so do all the other sectors of the economy and vice versa.

The Most Authentic Definition of the Trade/Cycle was Given by Mitchell and Burn

“Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises; a cycle consists of expansion occurring at about the same time in many economic activities, followed by similar general occasions, contractions and revivals which merge into the expansion phase of the next cycle; the sequence of changes is recurrent but not periodic in duration business cycles vary from more than one year to ten or even twelve years; they are not divisible in shorter cycles of similar character with amplitudes approximately their own.”

This particular definition explains all the characteristics of a trade cycles e.g. it tells us about the four phases of a trade cycle i.e. expansion and contraction, revival and recession.