The austrian business cycle theory and the recent financial crisis
DOI:
https://doi.org/10.18041/1900-0642/criteriolibre.2011v9n15.1201Keywords:
Austrian school of economics, economic cycle, fi nancial crisisAbstract
The argument presented in this paper is based on the recognition that the Austrian Business Cycle Theory is outdated in its description of how the effects of monetary phenomena are transmitted to the real sector and produce business cycles. In the paper it is argued that there are epistemological limitations for successfully preventing infl ationary credit expansions by the adoption of Infl ation Targeting policies and that the adoption of such policies is the cause of the economic boom that ended in 2007. It is also described in the paper how monetary contraction happened, starting in September 2008; and that is offered as an explanation for the beginning of the downturn. Finally, it is argued in the paper that once started the downturn a prudential response by the monetary authorities, one that would mimic the reactions of the competing money suppliers in a free market would have been, is the proper course of action under the current monetary arrangements.
Downloads
References
Bagus, Philipp (2010). “Morgenstern’s Forgotten Contribution: A Stab to the Heart of Modern Economics” to be published in the American Journal for Sociology and Economics.
Barnett II, William and Walter Block (2004). “On the Optimum Quantity of Money”, in The Quarterly Journal of Austrian Economics, Vol. Number 1, Spring Edition.
Barnett II, William and Walter Block (2005). “Money: Capital Good, Consumer’s Good or (Media of) Exchange Good?”, in The Review of Austrian Economics, Vol. 18, Number 2.
Bernanke, B., T. Laubach, F. S. Mishkin, and A. S. Posen (2001). Inflation Targeting, Lessons from the International Experience. Princeton: Princeton University Press.
Cwik, Paul F. (2009). “Recession Economics and Non-Neutral Money,” working paper presented at the Austrian Scholars Conference
2009, www.mises.org/journals/scholar/cwik4. pdf.
Den Uyl, Douglas (1991). The Virtue of Prudence, Studies in Moral Philosophy, Vol. 5, Peter Lang.
Eichengreen, Barry (2002). “Still Fettered After All This Years” in NBER Working papers series, paper 9276.
Friedman, Milton and Anna Jacobson Schwartz (1993). A Monetary History of the United States, 1867-1960. Princeton: Princeton University Press.
Greenspan, A. (2007). The Age of Turbulence. New York: The Penguin Press.
Hayek, Friedrich A. (1975). A Discussion with Friedrich Von Hayek, Domestic Affairs Studies, Number 39. Held at the American Enterprise Institute, April 9, 1975. Washington, DC: American Enterprise Institute for Public Policy Research.
Higgs, Robert (1987). Crisis and Leviathan, Critical Episodes in the Growth of American Government. Oxford: Oxford University Press.
Huerta de Soto, Jesús (2006). Money, Bank Credit, and Economic Cycles. Auburn: Ludwig von Mises Institute.
Hume, D. (1987). Essays Moral, Political and Literary. Indianapolis: Liberty Fund, Inc.
Miller, Robert C. B. (2009). “The Austrians and the Crisis” in the Journal of the Institute of Economic Affairs, Vol. 29, Number 3, England: Blackwell Publishing.
Mises, Ludwig von (2007). Human Action, a Treatise on Economics. Indianapolis: Liberty Fund, Inc.
Mises, Ludwig von (1980). The Theory of Money and Credit. Indianapolis: Liberty Fund, Inc.
Rand, Ayn (1963). “The Ethics of Emergencies” in The Virtue of Selfishness, Signet Centennial Edition. New York: New American Library.
Rothbard, Murray (2009). Man, Economy and the State with Power and Market, Scholar’s 2nd Edition. Auburn: The Ludwig von Mises Institute.
Taylor, John B. (1993). “Discretion Versus Policy Rules in Practice” in Carnegie -Rochester Conference Series on Public Policy, Number 39.
White, Lawrence H. (1995). Free Banking in Britain, Theory, Experience, and Debate, 18001845. London: Institute of Economic Affairs.
White, Lawrence H. (2008). “Did Hayek and Robbins Deepen the Great Depression?” in Journal of Money, Credit and Banking, Vol.
40, Issue 4.
Yeager, Leland B. (1983). “Stable Money and Free-Market Currencies” in Cato Journal, Vol. 3, Number 1, Spring. Washington, DC: Cato
Institute.
Yeager, Leland B. (1997). The Fluttering Veil, Essays in Monetary Disequilibrium.
Indianapolis: Liberty Fund, Inc.
