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Were Hayek?s Monetary Policy Recommendations Inconsistent?

Author

Listed:
  • Martin Komrska

    () (University of Economics, Prague)

  • Marek Hudík

    () (Centre for Theoretical Study, Charles University and Academy of Sciences, Prague)

Abstract

Contrary to the received view, we maintain that Hayek?s monetary policy recommendations were not inconsistent. The prevalent perception of early Hayek as the money stream stabilizer and late Hayek as the price level stabilizer is attributable to an unjustified normative interpretation of Hayek?s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means to achieve these goals. Hayek?s allegedly inconsistent switch from being a critic to an advocate of price level stabilization is explained by a change in the issues on which he focused, rather than by a change in his theoretical views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and was thus reluctant to impose his own value judgments about what people should strive for.*We would like to thank Pavel Potu?ák for his helpful comments on an earlier draft. Any mistakes are, of course, ours.

Suggested Citation

  • Martin Komrska & Marek Hudík, 2014. "Were Hayek?s Monetary Policy Recommendations Inconsistent?," Proceedings of Economics and Finance Conferences 0402133, International Institute of Social and Economic Sciences.
  • Handle: RePEc:sek:iefpro:0402133
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    File URL: https://iises.net/proceedings/2nd-economics-finance-conference-vienna/table-of-content/detail?cid=4&iid=17&rid=2133
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    References listed on IDEAS

    as
    1. White, Lawrence H, 1999. "Hayek's Monetary Theory and Policy: A Critical Reconstruction," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 109-120, February.
    2. Gottfried Haberler, 1986. "Reflections on Hayek's Business Cycle Theory," Cato Journal, Cato Journal, Cato Institute, vol. 6(2), pages 421-435, Fall.
    3. Nicolai Juul Foss, 1995. "More on “Hayek's Transformation”," History of Political Economy, Duke University Press, vol. 27(2), pages 345-364, Summer.
    4. Gerald O’Driscoll & Douglas Rasmussen, 2012. "Did Hayek have a monetary theory of business cycles?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 255-262, September.
    5. Bruce J. Caldwell, 1988. "Hayek's Transformation," History of Political Economy, Duke University Press, vol. 20(4), pages 513-541, Winter.
    6. Witt, Ulrich, 1997. "The Hayekian Puzzle: Spontaneous Order and the Business Cycle," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(1), pages 44-58, February.
    7. Anthony Carilli & Gregory Dempster, 2008. "Is the Austrian business cycle theory still relevant?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 21(4), pages 271-281, December.
    8. Lawrence H. White, 2008. "Did Hayek and Robbins Deepen the Great Depression?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 751-768, June.
    9. Block, Walter & Garschina, Kenneth M, 1996. "Hayek, Business Cycles and Fractional Reserve Banking: Continuing the De-homogenization Process," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 9(1), pages 77-94.
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    More about this item

    Keywords

    F. A. Hayek; monetary policy; Austrian business cycle theory; price level stabilization; money stream stabilization;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian

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