The upper turning point in the Austrian business cycle theory

This paper defends the relevance of Austrian Business Cycle theory (ABCT) within a fiat money regime, by providing an answer to whether a constant rate of credit expansion necessarily leads to a boom-bust cycle. We claim that this scenario has two potential outcomes, (1) a change in money demand bri...

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Bibliographic Details
Published inThe Review of Austrian economics Vol. 35; no. 1; pp. 89 - 97
Main Authors Evans, Anthony J., Cachanosky, Nicolás, Thorpe, Robert
Format Journal Article
LanguageEnglish
Published New York Springer US 01.03.2022
Springer Nature B.V
Subjects
Business cycles
Capital
Consumer goods
Consumers
Consumption
Discount rates
Economics
Economics and Finance
Growth rate
History of Economic Thought/Methodology
Interest rates
Money demand
Political Science
Preferences
Prices
Public Finance
Recessions
B53
Business cycles
E32
Austrian business cycle
Turning point
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Summary:This paper defends the relevance of Austrian Business Cycle theory (ABCT) within a fiat money regime, by providing an answer to whether a constant rate of credit expansion necessarily leads to a boom-bust cycle. We claim that this scenario has two potential outcomes, (1) a change in money demand brings the economy back towards equilibrium or (2) the economy will shift to a sub-optimal but still sustainable path. We identify capital heterogeneity effects and the Ricardo effect as distinctly Austrian explanations for an upper turning point, even in a fiat money regime.
ISSN:0889-3047
1573-7128
DOI:10.1007/s11138-019-00497-2