Austrian Business Cycle Theory in Light of the Financial Crisis: The Paradox of Prediction

2013 ◽  
Author(s):  
Anthony J. Evans
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Austrian Business Cycle

scholarly journals The Mises-Hayek business cycle theory

2021 ◽  
pp. 81-133
Author(s):  
Robyn Harte- Bunting
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Banking Sector ◽  
Jel Classification ◽  
Policy Recommendations ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Palabras Clave ◽  
Austrian Business Cycle ◽  
Similarities And Differences

The Paper is an Overview of Austrian Business Cycle Theory (ABCT) phenomena it is intended to explain, economy wide crisis especially concentrated on the banking sector. A short examination of similarities and differences between Mises and Hayek, the main developers of ABCT, is then given. Finally, some policy recommendations are examined in the light of ABCT. Key words: Financial Crisis, Business Cycle, Inflation, Saving. JEL Classification: B53, E42, E44, E61, G01, G21, P10, P20. Resumen: El artículo es una visión general de la Teoría Austriaca del Ciclo Económico (TACE) basada en un primer contacto con la literatura. La TACE se presenta en términos de los fenómenos que intenta explicar: crisis eco-nómicas, concentradas en el sector bancario. Después se expone una breve investigación de las semejanzas y diferencias entre Mises y Hayek, los prin - cipales contribuyentes a la TACE. El trabajo concluye con unas recomenda-ciones de política económica que se analizan a la luz de la TACE. Palabras clave: Crisis Financiera, Ciclo Económico, Inflación, Ahorro. Clasificación JEL: B53, E42, E44, E61, G01, G21, P10, P20.

scholarly journals From Orthodoxy to Heterodoxy: Financial Crisis Literature Compared

2016 ◽  
Vol 63 (s1) ◽  
pp. 71-87
Author(s):  
Ignacio Martínez ◽  
Gabriel Mursa
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Financial Markets ◽  
Financial Crises ◽  
Financial Instability ◽  
Business Cycle Theory ◽  
Economic Cycle ◽  
Austrian Business Cycle Theory ◽  
Economic Downturns ◽  
Austrian Business Cycle

Abstract In this paper we’ll attempt to explain the connection between interventionism in financial markets, financial crises and economic downturns, as the main cause of the financial crisis mainstream models; As well as the connection between the theories of Austrian and Minsky’s economic cycle as branches of heterodox economic theory. In order to achieve this target, we’ll begin with a brief introduction of mainstream financial crises models in the orthodox economic literature, then we’ll examine the statements of the Austrian Business Cycle Theory and the Financial Instability Hypothesis, and evaluate whether a connection between the two. We conclude that Financial Instability Hypothesis can be studied as a particular case of the Austrian Business Cycle Theory.

scholarly journals Keynesian Supply Shocks and Hayekian Secondary Deflations

2021 ◽  
Vol 24 (3) ◽  
Author(s):  
Lucas Engelhardt
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Aggregate Demand ◽  
Business Cycle Theory ◽  
Demand Shock ◽  
Austrian Business Cycle Theory ◽  
Employment Dynamics ◽  
Supply Shocks ◽  
Supply Shock ◽  
Austrian Business Cycle

In response to the COVID-19 lockdown policies, Guerrieri et al. (2020) developed a new concept: the Keynesian supply shock. A Keynesian supply shock is an aggregate supply shock that leads to an even larger aggregate demand shock. This paper suggests that Keynesian supply shocks are very similar to the secondary deflations suggested by Hayek (1931), and US data from the 2007–09 financial crisis show that these concepts may help to explain employment dynamics in the midst of a crisis. This fact implies that long-standing policy advice based on Austrian business cycle theory would be useful in responding to Keynesian supply shocks.

A brief note on economic recessions, banking reform and the future of capitalism

2021 ◽  
pp. 289-298
Author(s):  
Jesús Huerta de Soto
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Economic Recession ◽  
Central Banks ◽  
Business Cycle Theory ◽  
English Edition ◽  
Austrian Business Cycle Theory ◽  
Fractional Reserve ◽  
The Future ◽  
Austrian Business Cycle

In my book «Money, Bank Credit, and Economic Cycles» (1st Spanish Edition 1992, 2nd English Edition 2009) I present a detailed analysis of the Austrian Business Cycle Theory. Now I will concentrate on the financial crisis and the current worldwide economic recession as one of the most challenging problems we must now cope with and the way in which the Austrian Business Cycle Theory can help us to understand its causes and the best approach to economic recovery. Having witnessed the intellectual and practical defeat of socialism specially during the last decades of the twentieth century, in my opinion one of the main challenges that still remains for the future of Capitalism is the urgent need to privatize money by dismantling the organ of central monetary planning: the Central Bank. In other words, real Socialism, represented by state money, Central banks and financial administrative regulations, is still in force in the monetary and credit sectors of the so called free market economies. As a result of this fact we experience regularly in the area of money and credit all the negative consequences established by the Theorem of the Impossibility of Socialism discovered by those distinguished members of the Austrian School of Economics Ludwig von Mises and Friedrich Hayek. Specifically, the central planners of state money are unable to know, to follow and to control the changes in both the demand and supply of money. Furthermore, the whole financial system is based on the legal privilege given by the state to private bankers to act with a fractional reserve ratio in relation with the demand deposits they receive from their clients. As a result of this privilege, private bankers are not true financial intermediaries, but are mainly creators of deposits materializing in credit expansions. These credit expansions are artificial and do not correspond to any previous increases in the voluntary savings of the citizens. In this way the current fractional reserve banking system, tends to worsen and amplify the systemic intertemporal distortions and investment misallocations that the macroeconomic planners working for central banks induce in the production structure of the whole real economy. These distortions manifest themselves in the stages of financial bubbles, economic boom, overall malinvestment and afterwards in the stages of financial crisis, deep economic recession and unemployment.

Austrian Business Cycle Theory

2015 ◽  
pp. 185-212
Author(s):  
Andrew Young
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Housing Market ◽  
Great Depression ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
The Great Depression ◽  
Continuous Output ◽  
Austrian Business Cycle ◽  
Von Mises

Austrian business cycle theory (ABCT) is a body of hypotheses embodying particularly Austrian insights and assumptions. The canonical variant associated with Ludwig von Mises and Friedrich A. Hayek is particularly well suited to the Great Depression. However, it is an inadequate account of the recent US recession and financial crisis. This chapter develops a suitable ABCT variant that explicitly incorporates not only the economy’s time structure of production but also (1) its structure of consumption and (2) its risk structure. The continuous input–continuous output nature of the housing market is highlighted, along with the Treasury and the Federal Reserve’s roles in externalizing the risk associated with government-sponsored entities’ (GSEs’) debt. The chapter then extends Roger Garrison’s graphical framework to illustrate this ABCT variant.

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