The Austrian Theory of Business Cycles: Old Lessons for Modern Economic Policy?
AbstractThis paper reviews the "Austrian" theory of the business cycle first proposed by Friedrich Hayek in the 1920s. His theory claimed that credit creation by monetary authorities would push investment beyond society's long-term willingness to save, creating a mismatch between supply and demand that would inevitably cause recession. The theory argued, moreover, that expansionary policies in recession could generally only postpone the necessary structural adjustment, making the subsequent correction more severe. Modern followers of this theory see Austrian features in a number of recent business cycles, including Japan in the 1980s and 1990s, and the more recent U.S. slowdown.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 02/2.
Date of creation: 01 Jan 2002
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- Enrico Colombatto, 2004. "Sulle dinamiche del ciclo misesiano," ICER Working Papers 04-2004, ICER - International Centre for Economic Research.
- Jean-Marc Natal, 2004. "Deflation and Deflationary Traps: The Situation in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(I), pages 127-170, March.
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