Real business cycle (RBC) theory is a macroeconomic concept arguing that economic fluctuations are primarily driven by real (as opposed to monetary) changes in productivity or technology shocks.
The main driver is productivity or technology shocks. New technology or productivity gains expand the economy; productivity declines lead to recessions.
RBC theory holds that these fluctuations are natural, efficient market responses, and government intervention (monetary or fiscal policy) can actually make things worse.
In Bangladesh, direct application of RBC theory is limited, as demand-side factors, policy changes, and external influences play significant roles in the business cycle.