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The Austrian business cycle theory, rational expectations and historical time

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  • Tomá? Frömmel

    (University of Economics Prague, Department of Economics)

Abstract

This paper formulates the Austrian business cycle theory in historical time, considering institutional context of the central bank policy. Since central banks intervene permanently in credit markets, entrepreneurs may be fooled by their policies and an artificial boom may be initiated. Hence, the Austrian business cycle theory is able to explain the course of business cycle of current economies even if the rational expectations hypothesis holds.This paper formulates the Austrian business cycle theory in historical time, considering institutional context of the central bank policy. Since central banks intervene permanently in credit markets, entrepreneurs may be fooled by their policies and an artificial boom may be initiated. Hence, the Austrian business cycle theory is able to explain the course of business cycle of current economies even if the rational expectations hypothesis holds.

Suggested Citation

  • Tomá? Frömmel, 2017. "The Austrian business cycle theory, rational expectations and historical time," Proceedings of Economics and Finance Conferences 4507343, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:4507343
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    References listed on IDEAS

    as
    1. Carilli, Anthony M & Dempster, Gregory M, 2001. "Expectations in Austrian Business Cycle Theory: An Application of the Prisoner's Dilemma," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 14(4), pages 319-330, December.
    2. Hoppe, Hans-Hermann, 1997. "On Certainty and Uncertainty, or: How Rational Can Our Expectations Be?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 10(1), pages 49-78.
    3. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    4. Wagner, Richard E, 1999. "Austrian Cycle Theory: Saving the Wheat While Discarding the Chaff," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 12(1), pages 65-80.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business cycle; Austrian business cycle theory; rational expectations; historical time;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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