scholarly journals Asset prices - An Austrian Perspective

2021 ◽  
pp. 57-93 ◽  
Author(s):  
Philipp Bagus
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
Asset Price ◽  
Central Banks ◽  
Jel Classification ◽  
Austrian Economics ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Price Bubble ◽  
Austrian Business Cycle

Abstract: How asset prices should be taken into account in monetary policy is a controversial question in mainstream discussion. These mainstream positions can be differentiated into two broad perspectives: the proactive and the reactive views. The proactive view advocates pricking the asset price bubble, while the reactive view argues against monetary policy targeting asset prices. In this article the relation between asset prices and the Austrian business cycle theory is examined. Following this, a critique of both the proactive and reactive views is provided and implications for monetary policy are deduced. Key words: Austrian Economics, Business Cycles, Asset Prices, Central Banks and their Policies. JEL Classification: B53, E32, E58.

scholarly journals Financial Effects of Monetary Expansions

2018 ◽  
pp. 75-94
Author(s):  
Rafael García Iborra
Keyword(s):  
Business Cycles ◽  
Central Banks ◽  
Jel Classification ◽  
Financial Assets ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Palabras Clave ◽  
Austrian Business Cycle ◽  
Productive Structure ◽  
Financial Cycles

The Austrian Business Cycle Theory (ABCT) has traditionally been focused on the distortions created by monetary expansions on the productive structure of the economy. In this paper, I will try to show that, if central banks increase the monetary base and the agents’ preferences do not change, the dis- tortions will not be limited to the productive structure but will also affect the financial structure. This will lead to a series of financial cycles in which both bubbles and crashes, the financial counterparts of booms and crisis, will take place. Keywords: Bubbles, Business Cycles, Financial Assets, Financial Crisis. JEL Classification: E14, E32, E44, G01. Resumen: La Teoría Austriaca del Ciclo Económico (TACE) se ha centrado tra- dicionalmente en las distorsiones generadas por las expansiones monetarias en la estructura productiva de la economía. En este artículo, se intenta mostrar que, si los bancos centrales aumentan la base monetaria y las preferencias de los agentes se mantienen sin cambios, las distorsiones no se limitarán a la estructura productiva sino que también afectarán a la estructura financiera. Esto conducirá a una serie de ciclos financieros en los que burbujas y crashes, los equivalentes financieros de auges y crisis, tendrán lugar. Palabras clave: Burbujas, Ciclos Económicos, Activos Financieros, Crisis Finan- cieras. Clasificación JEL: E14, E32, E44, G01.

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 Book Review: "The Skyscraper Curse: And How Austrian Economics Predicted Every Major Economic Crisis of the Last Century"

2020 ◽  
Vol 23 (3-4) ◽  
pp. 627-633
Author(s):  
Michael Novak
Keyword(s):  
Business Cycle ◽  
Austrian Economics ◽  
Business Cycle Theory ◽  
Comprehensive Overview ◽  
Austrian Business Cycle Theory ◽  
Track Record ◽  
The World ◽  
Austrian Business Cycle ◽  
The Business Cycle

Mark Thornton’s The Skyscraper Curse exposes readers to the unique phenomenon of the Skyscraper Index and provides them with a comprehensive overview of Austrian business cycle theory (ABCT). The Skyscraper Index, as readers learn in the first few pages of the book, shows a correlation between the development of a new tallest building in the world and the business cycle. Although the Skyscraper Index does have a strong track record, the skyscrapers are not the heart of the matter but rather the policies of the Federal Reserve that promote and encourage skyscraper development.

scholarly journals Should Monetary Policy Respond To Asset Price Bubbles? Revisiting the Debate

2008 ◽  
Vol 206 ◽  
pp. 25-34 ◽  
Author(s):  
Sushil Wadhwani
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Asset Prices ◽  
Asset Price ◽  
Financial System ◽  
Central Banks ◽  
Macroeconomic Performance ◽  
Asset Price Bubbles ◽  
Price Bubbles ◽  
Inflation Forecasts

Recent events have highlighted the importance of asset prices to central bank decisions. We argue that, in response to asset price bubbles, central banks should ‘lean against the wind’ (LATW hereafter). Even if the bubbles themselves are not significantly affected by LATW, macroeconomic performance can be improved if monetary policy reacts to asset price misalignments over and above the reaction to fixed horizon inflation forecasts. In addition, it might reduce the probability of bubbles arising at all. This article restates the case for LATW, and reviews the debate. In particular I respond to various criticisms that have been made against LATW and briefly consider alternative policies designed to make the financial system less cyclical.

scholarly journals Central Banking and Crisis Management from the Perspective of Austrian Business Cycle Theory

2019 ◽  
pp. 550-584 ◽  
Author(s):  
Gunther Schnabl
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Crisis Management ◽  
Growth Dynamics ◽  
Central Banking ◽  
Business Cycle Theory ◽  
Price Inflation ◽  
Austrian Business Cycle Theory ◽  
Austrian Business Cycle

This chapter analyzes the evolution and effects of central bank crisis management since the mid-1980s based on a Hayek-Mises-Wicksell overinvestment framework. It is shown that given that the traditional transmission mechanism between monetary policy and consumer price inflation has collapsed, asymmetric monetary policy crisis management implies a convergence of interest rates toward zero and a gradual expansion of central bank balance sheets. From a Wicksell-Hayek-Mises perspective, asymmetric central bank crisis management has contributed to financial market bubbles, decreasing marginal efficiency of investment, increasing income inequality, and declining growth dynamics. The economic policy implication is a slow but decisive exit from ultra-expansionary monetary policies.

scholarly journals Lessons from a Review of Money, Banking, and the Business Cycle

2018 ◽  
Vol 21 (2) ◽  
pp. 97-113
Author(s):  
Brian P. Simpson
Keyword(s):  
Business Cycle ◽  
Interest Rates ◽  
Austrian Economics ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Austrian Business Cycle ◽  
The Business Cycle ◽  
Rate Of Profit ◽  
The Relationship

Abstract Shawn Ritenour provides a review of my two-volume book titled Money, Banking, and the Business Cycle in the winter 2016 issue of The Quarterly Journal of Austrian Economics. This paper constitutes a response to some of the criticisms of the book in his review. In this response, I discuss topics such as the nature of profits, the sustainability of changes in time preference, the role of changes in prices versus changes in spending in the business cycle, the relationship between interest rates and the rate of profit, the nature of fraud, and the nature of value. I also discuss whether the structure of production can be measured using the average period of production. I address other issues raised by Ritenour as well. This discussion sheds light on Austrian business cycle theory and the nature of the business cycle.

scholarly journals Business Cycle and Stability of China’s Financial and Monetary System

2020 ◽  
pp. 123-171
Author(s):  
William Hongson Wang ◽  
Antonio Vegas García
Keyword(s):  
Business Cycle ◽  
Banking System ◽  
Central Banking ◽  
Jel Classification ◽  
Shipping Industry ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Monetary System ◽  
Austrian Business Cycle ◽  
China’S Economy

The importance of China’s economy and the instability of China’s fi-nancial system are in the spotlight recently. This paper uses Austrian Business Cycle Theory to gauge the potential risks of China’s economy. The approach of this paper is a sector analysis, focusing on China’s monetary and financial system, shipping industry, and real estate industry, especially the state-owned enterprises in those sectors. We conclude that China’s central banking system is hurting China’s economy and we also propose reforms to overhaul the system, according to the perspective of praxeology and Austrian School Econom-ics. Keywords: Austrian Business Cycle Theory, China’s banking system, China’s economy. JEL Classification: B53, D8, E310, E32, E52, H12, N15, N27, N45, N65, O53, P11, R3, R4, Y10. Resumen: La importancia de la economía china junto con la reciente inestabili-dad del sistema financiero de China, preocupan al resto del mundo. Este artí-culo usa la Teoría Austriaca del Ciclo Económico para identificar los riesgos potenciales de la economía de China. En este artículo realizaremos un análisis sectorial, enfocado en el sistema monetario y financiero de China, el sector de la construcción, la industria marítima y, en especial, las empresas estatales de dichos sectores. Concluimos que el actual sistema de banca central en China está dañando a su economía y proponemos soluciones desde la perspectiva de la praxeología y la Escuela Austriaca de Economía. Palabras clave: Teoría austriaca del ciclo económico, sistema bancario chino, economía china.

scholarly journals Economic modelling – Beyond isolation and construction. The case of Austrian Business Cycle Theory as presented by Roger Garrison

2020 ◽  
Vol 70 (2) ◽  
pp. 251-273
Author(s):  
Robert Mroz ◽  
Lukasz Hardt
Keyword(s):  
Business Cycle ◽  
Model Building ◽  
Integrated Approach ◽  
Austrian Economics ◽  
Philosophical Tradition ◽  
Economic Modelling ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Austrian Business Cycle ◽  
The One

AbstractThe paper explores the nature of economic models. It is claimed that accounting for it along the isolationism-constructivism line is untenable. A more integrated approach is needed, based on the pragmatist philosophical tradition, focussing rather on the modelling process than on the narrower notion of the model. This argument is backed by a case study: analysis of the Austrian Business Cycle Theory (ABCT) as presented by Roger Garrison, which, as is argued, does not fully fit either the isolationist or the constructivist account of models. It is primarily shown by revealing the fact that learning about the world by using ABCT is not of deductive nature. Therefore, even in the presence of such a strong realistic methodology as the one in the Austrian economics, models used by its adherents are not necessarily perfect isolations. At the same time, this realistic methodology is not in line with the constructivist approach in model-building. The paper should be understood as an exercise in philosophy of economics, namely as an attempt at better understanding of various aspects of economics (here it is models and specifically ABCT) by taking the perspective offered by philosophy of science.

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.

scholarly journals The causes of the Japanese deflationary crisis in the light of the Austrian school of economics

2012 ◽  
Vol 3 (1) ◽  
pp. 29-48
Author(s):  
Bartosz Karpiński
Keyword(s):  
Monetary Policy ◽  
Business Cycle ◽  
Relevant Literature ◽  
Austrian School ◽  
Japanese Economy ◽  
Business Cycle Theory ◽  
Remarkable Case ◽  
Austrian Business Cycle Theory ◽  
Austrian School Of Economics ◽  
Austrian Business Cycle

The aim of this study is an attempt to indicate the causes of deflationary crises through the presentation of the phenomenon of deflation and its causes in the light of the Austrian school of economics and to show that the most remarkable case of deflation in recent history, which took place in Japan confirms the Austrian assertions in respect of factors causing severe deflation. For this purpose, basing on relevant literature, the author presents the Austrian view on the concept of deflation and the main aspects of the Austrian Business Cycle Theory. Subsequently, the author analyzes the monetary policy of Japan in the period preceding deflation, pointing out the facts from the contemporary Japanese economy seem to confirm the assertions of the Austrian school of economics.

Sign in / Sign up

Export Citation Format

Share Document